TrueMark elevates structured outcome with ‘uncapped upside’ series

TrueMark recently announced the launch of its seventh structured outcome fund boasting a 2.0 buffer. The ETF is sub-advised by SpiderRock Advisors, a Chicago-based asset management firm specialising in option overlay strategies.

The fund (JANZ) provides structured outcome exposure to the S&P 500 Price Index. TrueMark believes its structured outcome ETF suite is the first of its kind to offer built-in downside buffers with uncapped upside participation.

When the market runs, it runs quickly, and it rises sharply

“We believe in the positive return bias of US, large cap equities,” said Loukas. “Upside volatility events occur in a non-sequential and non-linear pattern, and it's important to capture those events when they occur.

“When the market runs, it runs quickly, and it rises sharply. Investors need to be in position to capture that. Long-term compounded returns are heavily dependent upon capturing this good volatility, as we call it.”

The new product delivers a buffer of between eight and 12% on the first of the index’s losses over the fund’s one-year investment period and has an expense ratio of 0.79%.

The launch responds to new investor needs as the first generation of the structured outcome ETFs only addresses one side of the volatility scale as it tries to mitigate bad volatility.

“What we're trying to do is address both sides,” said Loukas. “We want to mitigate the bad volatility and capture as much of that good volatility as possible, because it really is fundamental to achieving or maximizing your long-term gains.”

Loukas noted that the anticipated post-lockdown cyclical rotations of the previous year served as a playing field for growth buyers which stemmed concentrated activity and secular growth in specific technology segments such as artificial intelligence.

“In the last couple of quarters, I think we've seen a resurgence of investors looking for yield. There are still plenty of growth investors out there as well, so you've got a plethora of different undercurrents in the market right now,” said Loukas.

Structured outcome funds can also aid in minimising drawdown risk and in turn, assists retiree clients in guarding their nest eggs.

“A situation where a client has to withdraw money when the market is in a trough is less than ideal since they would not be participating in that snapback or rebound,” said Loukas.

“These types of products help address one of the major concerns of drawdown risk for retirees (or those nearing retirement) in the sense that mitigating that downside can help protect them against untimely withdrawals, which can be particularly detrimental depending on where the market is.”

Investor education, however, remains a constant effort in the investment business as investors need to understand the difference between cyclical growth and secular growth, or the difference between long-term compounded gains and short-term volatility.

“Establishing clear expectations is the key to helping advisors and investors alike build successful portfolios,” Loukas said.