The Vest Financial Group will be the first to offer products on the new CBOE S&P 500 Enhanced Growth Indexes launched by Chicago Board Options Exchange (CBOE) yesterday (July 6).

The new products are intended to complement Vest products based on the CBOE S&P 500 Buffer Protect Indexes launched in April by the CBOE. The new series of 13 Enhanced Growth Indexes is the second in a family of options-based strategy performance benchmarks designed to target the outcomes of specific investment strategies. CBOE made a majority equity investment in Vest in January 2016.

The new 'target outcome' indices will resonate with investors for the same reason that structured notes do, according to Karan Sood, (pictured), chief executive at Vest. "They provide access to pre-defined payoffs at a specific date in the future (...) [and] provide a level of predictability for returns that is unachievable by most other conventional investments," said Sood. "[We are] working on providing access to these index series through products, such as mutual funds, managed accounts and insurance products. In managed accounts, investors can combine various Vest index products to build unique Target Outcome portfolios."

The indices measure the performance of a hypothetical portfolio of S&P 500 Index FLexible EXchange (Flex) options designed to provide targeted annual returns. CBOE began disseminating daily values for the new benchmarks on June 24, 2016.

The indices take a similar approach to the CBOE S&P 500 Buffer Protect Indexes that were announced in April, but target a different return profile. "Both series of indexes are designed for investors who seek to clearly define their investment objectives and risk-return parameters," said Sood.

According to Steve Neamtz, senior managing director at Vest, much like the S&P Buffer Protect strategy, the Enhanced Strategy invests in 12 equally weighted tranches of 1 yr rolling investments which participate in the movement of the S&P 500 index. "In the case of the Enhanced strategy, The participation on the downside is designed to follow the result of the index 1 for 1," said Neamtz. "On the upside of the S&P 500 the investor receives an accelerated return of 2 for 1 up to a maximum available cap in each tranche."

This upside is achieved not thru the use of leverage but rather by trading off (or giving up) longer term available upside for a maximum upside for the one year period, according to Neamtz. "Each one year period of the tranche is rolled to the following year's available upside max return (based on Vol and interest rates) at that time," siad Neamtz. "This strategy offers wonderful opportunities to quantify improved upside participation and interject much needed potential superior results given the investment opportunity."

Each of the indices in the CBOE S&P 500 Enhanced Growth series is designed to track the returns of a hypothetical investment that, over a period of approximately one year, seeks to provide two-to-one enhanced returns on the appreciation of the S&P 500 Index up to a capped level, while providing one-to-one exposure to any losses.

The strategy uses options to target increased participation in positive returns up to a predetermined level - essentially allowing investors to better define their returns for the year. There is no premium or discount to enter into the strategy, compared with an outright investment in the S&P 500 Index.

The CBOE S&P 500 Enhanced Growth Indexes comprises 13 indices, including 12 monthly series that roll on the third Wednesday of the month. In addition, CBOE has launched the CBOE S&P 500 Enhanced Growth Index Balanced Series, a balanced index comprised of a composite of the 12 monthly series, in which each monthly series is allocated an equal weight at each monthly roll date.

This new series will be offered similarly to the Armor 10 strategy, said Neamtz. "Just as the Armor 10 is available in a separately managed account and soon mutual fund, the Enhanced S&P 500 Strategy will be offered in the same investment options."

This update includes comments from Steve Neamtz, senior managing director at Vest.

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