Objective
The Fund’s investment objective is to provide investment results that closely correspond, before fees and expenses, generally to the price and yield performance of the CBOE S&P 500® 15% WHT Quarterly 9% (-3% to -12%) Buffer Product Index (the “Index”). The Index seeks to provide similar returns to the S&P 500® Index (the “Reference Index”), with lower volatility and downside risks, in most market environments except for when the U.S. equity market is rallying. The Fund is passively managed. The Fund will seek to replicate the performance of the Index by investing primarily in a basket of global equity securities and equity related securities (the “Basket”) and will enter into an unfunded swap agreement with approved counterparties governed by the International Swaps and Derivatives Association to exchange the performance/return of the Basket for the return of the Index minus any associated fees (the “Swap”). The Index is designed to track the returns of an investment in the Reference Index via a portfolio of equities over a period of approximately a calendar quarter (the “investment period”) while also seeking to provide downside protection against declines in value of between -3% to -12% (the “buffer”) in the Reference Index. The term "tail hedge" is used in the name of the Fund as the (capital) protection of the Fund’s investment policy will take effect after a pre-determined level of downturn (-3%) in the return of the Reference Index and typically protects larger drawdowns, i.e. has a longer 'tail' (-12%). The buffer provided by the Index is constructed via a put spread whereby the Index purchases a put option on the Reference Index at a higher strike price (-3% out-the-money) and sells a put option on the Reference Index at a lower strike price (12% out-the-money). The put spread seeks to protect against a decline in the Reference Index, but only to the extent of the difference between the strike prices of the put option purchased and the put option sold. There will be a cost paid for these options, the premium. The premium paid for the purchased put option will be more than the premium received for the sold put option. In order to cover the cost of the put spread that facilitates the buffer, a call option on the Reference Index is sold, or written, by the Index in exchange for receipt of a premium by the Index that matches the cost of the put spread. While writing the call options reduces the cost of the provision of the buffer, it does operate to limit the Index’s participation in the rise of the value of the Reference Index beyond the exercise price of the written call option, which acts as a cap on the potential increase in the value of the Index. The full buffer and cap levels may only be realised by investors who hold shares of the Fund at the outset of the investment period and continue to hold them until the conclusion of the investment period. Investors that purchase shares after the investment period has begun or sell shares prior to the investment period’s conclusion may experience investment returns very different from those that the Fund seeks to provide as the NAV of the fund moves during the period against the static buffer and cap. Where it is not possible or practicable for the Fund to invest in swaps, the Fund may also gain exposure to the Index through investment in other FDI such as options and futures, through investment in units of other collective investment schemes, and/or through investment in a portfolio of equity securities that, as far as possible and practicable, consists of the component securities of the Index. When not possible or practicable to continue to hold all of the component securities of the Index, the Fund may invest in other FDI such as options and futures, investment in other collective investment schemes, and/or through investment in a portfolio of equity securities that, as far as possible and practicable, consists of the component securities of the Index.
- Leverage100
- Currency hedgingNo