FT Vest Fund of Buffer ETFs

BUFR

Market cap $7.53B

BUFR offers risk-averse investors a laddered buffer strategy, limiting downside to 10% while providing partial upside participation via a basket of 14 ETFs. The fund uses a collar options strategy, layering expiration dates to ensure ongoing upside potential and reduce the need for frequent fund switching. Downside protection only applies at expiration and to the initial launch price, so timing of purchase affects the actual buffer and risk exposure.

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Markets are coming off back-to-back gains of more than 20% each on an annual basis. That's historically rare, and the chances of a hat trick in 2025 are slim to none.

On Monday, First Trust Advisors expanded its suite of Target Outcome ETFs with the launch of the FT Vest U.S. Equity Equal Weight Buffer ETF – December (RSDE). RSDE's goal is to provide investors with access to the returns from the Invesco S&P 500 Equal Weight ETF (RSP), up to a cap.

Buffer funds like FT Vest Laddered Buffer ETF use options to mitigate downside risk while capping upside potential, appealing to cautious investors. The BUFR ETF's laddered strategy splits the fund into four sub-portfolios, enhancing rebalancing opportunities and potentially capturing higher upside caps. BUFR invests in FLEX Options on SPY, offering a unique risk-return profile tied to the S&P 500 index.

Recent downturns from the Great Recession and the worldwide pandemic are still fresh on investors' minds. Now any pullback in the market has left investors shaky.

ETF managers are creating buffered funds with upside caps and targeted maximum downside risk to cater to changing investor needs and goals. The FT Vest Laddered Buffer ETF holds one ETF that resets each month, aiming to provide capital appreciation while limiting downside risk. BUFR offers a laddered portfolio approach to manage investment timing risks, with each underlying ETF resetting its cap and buffer monthly based on the price level of SPY.

Last week was fairly active within the ETF industry. The period ending May 10 saw the launch of 11 new ETFs, including funds from Global X, WisdomTree and TCW.