The latest installment in the increasingly popular category of buffered exchange-traded funds suggests there might be no limit to innovation when it comes to the investment category often referred to as “boomer candy.”
The TrueShares Seasonality Laddered Buffered ETF (ONEZ) seems to combine just about every bell and whistle that has thus far been introduced to the category.
ONEZ, which started trading Jan. 28, is the latest product from TrueMark Investments, a Chicago-based issuer with 23 ETFs that combine for nearly $900 million in assets under management.
Of those 23 ETFs, 15 fall into the managed volatility space, and TrueMark employs every one of them in the management of ONEZ.
The ETF is an actively managed strategy that invests in 14 underlying TrueMark ETFs, including 12 traditional buffered ETFs that have defined outcomes and mature on a rolling basis, and two ETFs that will be used to make bullish and bearish bets on the direction of the market.
The use of TrueShares Quarterly Bull Hedge ETF (QBUL) and the TrueShares Quarterly Bear Hedge ETF (QBER) signifies yet another new twist in the buffered ETF space, which is growing in popularity among investors in or near retirement.
ONEZ is designed to toggle between small weightings in QBUL and QBER, depending on the market conditions. That essentially serves as the active part of ONEZ, which has an expense ratio of 0.98%.
According to Michael Loukas, TrueMark principal and chief executive, ONEZ will typically allocate between 85% and 90% of the assets across the suite of buffered ETFs, which include some downside protection but no upside performance caps.
The remaining 10% to 15% of portfolio assets will be allocated to the hedged ETFs, which each include 100% downside principal protection, meaning the hedged component doesn’t alter the risk profile of ONEZ.
While TrueShares' new ETF has "buffered" in the name, it distinguishes itself from traditional buffered ETFs in that it functions as a laddered fund of underlying buffered ETFs.
“These are funds of funds that hold defined outcome products, but there is no defined outcome,” Loukas said. “With the laddered strategy, the buffer goes out the window and it’s just a plain old volatility-managed strategy.”
Even though ONEZ, along with all TrueMark ETFs, has no upside cap, Loukas said the ETF is not designed to track the broad markets 100%.
“All of our products are uncapped, but they have a participation rate, which means they will capture about 75% to 80% of upside,” he said. “This is squarely in the volatility managed category; if you’re bullish to the moon, just go straight into equities.”
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