TORONTO, May 21, 2020 (GLOBE NEWSWIRE) -- FT Portfolios Canada Co. (“First Trust Canada”), a privately-owned company, announced today that it has launched the hedged units of the First Trust Cboe Vest U.S. Equity Buffer ETF - May (TSX: MAYB.F) (the “fund”). The fund is sub-advised by Cboe Vest Financial LLC (“Cboe Vest”) using a “target outcome strategy” or pre-determined investment outcome.
The fund seeks an outcome that provides investors with returns (before fees, expenses and taxes) that match the price return of the SPDR® S&P 500® ETF Trust (“SPY” or “underlying ETF”), up to a pre-determined upside cap, while buffering against potential losses. To achieve its objectives, the fund uses FLexible EXchange Options (“FLEX Options”) that reference the price return of the underlying ETF. FLEX Options are equity or index option contracts that trade on an exchange, but provide investors with the ability to customize key contract terms like exercise prices, styles and expiration dates. As the fund will invest in FLEX Options which are traded in U.S. dollars, the fund will, in respect of its hedged units, generally seek to hedge substantially all of its U.S. dollar currency exposure back to the Canadian dollar.
The fund seeks to shield investors from the first 10% of losses (before fees, expenses and taxes), based on the value of the underlying ETF at the time the fund enters into the FLEX Options on the first day of a defined period known as the target outcome period. However, the fund can be held indefinitely as terms will reset at the end of each outcome period and the cap and buffer for each subsequent target outcome period will likely differ from the initial outcome period. The cap for the initial target outcome period has been set at 15.35%.
We believe a buffer against a level of losses can help investors stay invested during volatile times. “Recent market volatility may lead many investors to move money out of the market and sit on the sidelines until things calm down. Providing targeted equity market exposure to the S&P 500 Index combined with a defined downside buffer of 10%, may help remove some of the uncertainty and extreme volatility we have seen over the last several months with equity and fixed income investing,” said Karl Cheong, CFA, Head of Distribution at First Trust Canada. The fund offers investors and advisors a way to gain access to outcome-based investing – specifically to buffer against a level of downside risk while allowing growth to a maximum cap – eliminating bank credit risk, in a convenient, flexible investment vehicle.
“We are pleased to work with First Trust Canada to offer the May series of Target Outcome ETFs®. For investors who may want to reduce their equity risk in the market but retain potential for growth, MAYB.F provides an opportunity for upside returns to a maximum cap on U.S. Large Cap Equities while protecting against a targeted level of losses,” said Karan Sood, CEO of Cboe Vest and portfolio manager for the fund. “This new Canadian ETF represents the latest addition to the growing suite of Target Outcome Investments™, providing advisors with a full arsenal of options-based risk management strategies,” Sood added.
Risk Considerations
The fund’s investment strategy is designed to deliver returns that match the price return of the underlying ETF (before fees, expenses and taxes) if the fund’s hedged units are purchased on the day on which the fund enters into the FLEX Options (i.e., the first day of the applicable target outcome period) and held for the entire target outcome period, subject to a pre-determined cap, or until those FLEX Options expire at the end of the target outcome period. If an investor does not hold its hedged units for an entire target outcome period, the returns realized by that investor may not match those the fund seeks to achieve. In the event an investor purchases hedged units of the fund after the first day of a target outcome period or sells hedged units prior to the expiration of the target outcome period, the value of that investor’s investment may not be buffered against a decline in the market price of the underlying ETF and may not participate in a gain as a result of an increase in the market price of the underlying ETF up to the pre-determined cap for the investor’s investment period.
About First Trust
First Trust Canada is the trustee, manager and promoter of the fund. First Trust Canada and its affiliates First Trust Advisors L.P. (“FTA”), portfolio advisor to the fund, an Ontario Securities Commission registered portfolio manager and U.S. Securities and Exchange Commission registered investment advisor, and First Trust Portfolios L.P., a FINRA registered broker-dealer, are privately held companies that provide a variety of investment services. FTA has collective assets under management or supervision of approximately U.S. $127 billion as of April 30, 2020 through unit investment trusts, exchange-traded funds, closed-end funds, mutual funds and separate managed accounts.
About Cboe Vest:
Cboe Vest is the creator of Target Outcome Investments™, which strive to buffer losses, amplify gains or provide consistent income to a diverse spectrum of investors. Cboe Vest’s Target Outcome Strategies™ are available in mutual funds, exchange-traded funds (ETFs), unit investment trusts (UITs), collective investment trusts (CITs), and customizable managed accounts / sub-advisory services. For more information about Cboe Vest and the evolution of Target Outcome Investments, visit www.cboevest.com, or contact Linda Werner at lwerner@cboevest.com or 703-864-5483.
Further information about First Trust Canada’s ETFs can be found at: www.firsttrust.ca
Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing. Exchange traded funds are not guaranteed, their values change frequently, and past performance may not be repeated.
Target Outcome Investments, Target Outcome Strategies and Target Outcome ETFs are registered trademarks of Cboe Vest Financial LLC.
For further information:
Media Contact:
Karl Cheong
FT Portfolios Canada Co.
40 King Street West, Suite 5102
416-865-8053 or 1-877-622-5552
karlcheong@firsttrust.ca