Zega Financial Debuts 1st ETF

The Florida firm seeks hedged returns against the S&P 500.

Reviewed by: Dan Mika
Edited by: Dan Mika

The Florida-based investment advisor Zega Financial launched its first ETF through the debut of its ZEGA Buy and Hedge ETF (ZHDG) on Wednesday, seeking to model one of its retirement strategies for the broader market.

The fund trades on the NYSE Arca, carrying an expense ratio of 1.02% between the 0.95% management fee and an acquired fund fee of 7 basis points. Tidal ETF served as Zega’s launch partner.



ZHDG tracks the S&P 500, but reserves 8-10% of its portfolio space for FLEX options and option contracts on other ETFs tracking the index, along with options on the S&P 500’s value itself. Zega intends to use a ladder strategy with its options over the following 12 months to limit losses by 8-10% in the event of a major market downturn.

In this sense, ZHDG follows in the same vein as other defined outcome ETFs like the Innovator S&P 500 series, but doesn’t have a set end date for its downside protection, and trades an upside limit for higher management costs.

The fund also invests in fixed income through a variety of vehicles, and its starting assets include the SPDR Bloomberg Barclays Short Term High Yield Bond ETF (SJNK) and the SPDR Blackstone Senior Loan ETF (SRLN), both of which provide exposure to junk-rated corporate debt.

The two ETFs represent positions of nearly 44% of the entire portfolio. Zega is planning that the high-yield debt revenue from those holdings will help offset the cost of buying options positions.

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Dan Mika is a reporter for etf.com. He has previously covered business for the Ames Tribune and Cedar Rapids Gazette in Iowa, and BizWest Media in Fort Collins, Colorado. Dan holds a bachelor's degree in journalism from Truman State University.