First Trust today announced the launch of the FT Vest U.S. Equity Equal Weight Buffer ETF – March on the NYSE Arca. The fund has an expense ratio of 0.85%.
RSMR primarily invests in FLEX Options, which are special contracts that allow investors to bet on the performance of the Invesco S&P 500 Equal Weight ETF Trust (RSP ). These options track the performance of RSP, its underlying ETF, over a one-year period. These options are customizable. This allows for flexibility, most importantly, around pricing and timing.
Upside Potential With Downside Protection
The fund aims to match the price return of RSP up to a cap of 13.86%. Meanwhile, it protects against the first 10% of losses from the underlying ETF’s level at the start of its outcome period.
However, if RSP drops more than 10% in price, it will start losing money at the same rate as the ETF’s losses, beyond its initial protection limit. Note that these outcomes are affected by fees and other costs. Those reduce the cap to about 13.01% and the protection to 9.15%.
Vest Managing Directors Karan Sood and Trevor Lack will manage RSMR.
Growing Interest in Buffer Strategy
RSP has gotten more attention recently, as investors have become increasingly concerned with the concentration levels in the S&P 500 index, particularly among the Magnificent Seven stocks. The new fund offers exposure to RSP’s price performance, while limiting risk.
With over 160 ETFs listed in the United States, First Trust has extensive experience with various strategies in the ETF space.
For more information, please visit VettaFi.com | ETF Trends.
