CBOE Vest, an investment manager focused on Target Outcome Investment strategies, announced it has launched the CBOE Vest S&P 500 Enhanced Growth Strategy Fund (ENGIX). The fund is designed to track the CBOE S&P 500 Enhanced Growth Index Balanced Series (SPEN).
Conventional strategies that aim to deliver enhanced upside performance typically accomplish this through leverage. However, such approaches leave investors exposed to enhanced losses as well. By using options, the Enhanced Growth Strategy employed by the Fund seeks to deliver 2x upside performance on the S&P 500 up to a variable cap, without additional leverage on the downside.
Enhanced growth strategies are proving quite popular with investors, especially in ‘the new normal’ of lower-than-expected global economic growth and muted appreciation of asset prices,” said Steve Neamtz, Senior Managing Director at CBOE Vest. “Offering the possibility of enhanced returns in exchange for limited outsized returns offers a potentially viable alternative for growth in today’s growth challenged environment.” Data shows that when the S&P 500 experiences growth, more often than not, it’s between 0% and 20%: over the past 16 years, S&P 500 price returns over a rolling 12-month period have been between 0% to +20% roughly 58% of the time.
Designed to enhance growth while keeping losses in line with the market and limiting returns to be below a cap, the Enhanced Growth Strategy Fund invests in a series of 12 monthly rolling “tranches” of an “Enhanced Growth” strategy. Each tranche seeks to target, before fees and expenses, returns or losses that are a function of the price performance of the S&P 500 Index from the third Wednesday of that month to the third Wednesday of the same month the following year (the “tranche holding period”). Over the tranche holding period:
- If the S&P 500 Index appreciates: The tranche seeks to provide a total return that increases by twice the percentage increase of the S&P 500 Index, up to a maximum return that is determined at the start of the tranche holding period.
- If the S&P 500 Index decreases: The tranche seeks to provide a total return loss that is equal to the percentage loss on the S&P 500 Index.
We’re thrilled to be able to bring this exciting new strategy to market, because of the tremendous opportunities it stands to offer growth-hungry investors,” added Neamtz. “Investors want to participate in market gains, and want to maximize their gains when possible, but they don’t want to be on the hook for leveraged losses on the downside as well. We think this could be the answer they’re looking for.
ENGIX is the third mutual fund launched by CBOE Vest, following the August launch of the CBOE Vest S&P 500 Buffer Protect Strategy Fund (BUIGX) and the October launch of the CBOE Vest Defined Distribution Strategy Fund (VDDIX).