Vest U.S. Large Cap 10% Buffer Strategies Fund

Seeking a Balance of Protection and Performance

 


Morningstar Rating: Overall
As of 02/29/2024, 215 Funds in Category
Category: Options Trading. Criteria: Risk-adjusted returns.

The Vest U.S. Large Cap 10% Buffer Strategies Fund (the “Fund”) seeks capital appreciation. The Fund is designed to cushion against (or “buffer”) equity losses in down markets, while taking advantage of growth opportunities in up markets.

The Fund invests in a laddered portfolio of a disciplined options strategy, called the “10% Buffer Strategy.” The goal of each 10% Buffer Strategy is:

Protect 10% of Downside Losses

Seeks to buffer the first 10% of losses in U.S. large-cap equities when markets turn volatile

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Participate in Upside Performance

Seeks to capture potential growth in U.S. large-cap equities, to a maximum gain.

Why Invest in This Fund
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Why Invest in This Fund

Buffering the first 10% of losses can help investors stay invested

Equities offer promising growth potential for investments, but equities can be severely affected by events that are difficult to predict. Losses can have a greater impact on investments than gains, because the money left after the loss has to work harder just to get back to the original levels.

The Fund offers an innovative approach that seeks to strike the right balance: aiming to provide a persistent cushion against potential equity losses while allowing investors to participate in some of the potential growth opportunities that equities provide.

Seeking a more certain alternative to traditional risk management strategies

Traditionally, investors have relied on diversifying equities with bonds, or market timing, to help minimize their risks from losses. But these strategies may be challenged in certain market environments.

  • 60/40 may not be the answer
    Many investors maintain an allocation to fixed income investments to provide a counterbalance to equities during times of market volatility. However, bonds may decline at the same time as equities, negating the expected counterbalance benefit. Fixed income may also be challenged when interest rates rise, and lose purchasing power in an inflationary environment.
  • Being cautious does not mean being in cash
    Investors who sell at the first sign of market downturns and wait on the sidelines in cash for the market to recover can miss out on top-performing days, which can have a big impact on returns.

When will the next pullback occur, or when will interest rates or inflation rise? While it’s not possible to predict the future, it is important to prepare for it. The Fund offers a new approach that may help cushion an investment against losses through the use of options—instruments that seek to offer a contractual level of certainty that other approaches lack. To understand the contractual nature of options and why it matters, click here.

Bond prices typically decrease when interest rates rise
Bond prices typically decrease when interest rates rise
Cashing out of equities can hurt performance
Cashing out of equities can hurt performance
A potential alternative to structured notes and structured annuities

Some structured notes and variable annuities provide targeted outcomes like the Buffer Strategy but may come with unique risks, including concentrated credit risks, lack of transparency and lack of liquidity. For a comparison of these investment products, click here. The Fund offers access to the Buffer Strategy in a potentially more transparent, more liquid and more familiar investment vehicle of a mutual fund. In addition, investing in a Buffer Strategy with a single maturity as is commonly done in structured notes or annuities comes with acute timing risks. The Fund follows a laddered portfolio approach, in an attempt to manage these timing risks. To better understand these timing risks, click here.

How It Works
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How It Works

The Fund seeks to meet its objective by providing investors with U.S. large-cap equity market exposure while attempting to limit downside risk through a laddered portfolio of twelve 10% buffer strategies (each a “10% Buffer Strategy”) linked to a U.S. large-cap equity index (the “Index”) or to an exchange-traded fund (an “ETF”) that tracks such a U.S. large-cap equity index.

The 10% Buffer Strategy

The 10% Buffer Strategy is an option strategy designed to cushion against or “buffer” the first 10% drop in a U.S. large-cap equity index or ETF over a period of approximately one year, while still providing the opportunity for growth from appreciation in the reference asset to a maximum predetermined cap level (“cap”). While the Advisor seeks to deliver the returns for each of the twelve 10% Buffer Strategies in the laddered portfolio, the strategy may not work as intended. The protection intended by the strategy is not guaranteed and it is possible to lose more than the targeted 10% buffer.

The cap level is set at the start of the one-year period, such that giving up potential returns above the cap pays for the 10% buffer. The returns of the strategy will be a function of the level of the index or ETF at the end of the period relative to its level at the start of the period, as detailed in the illustration below. The value of Fund shares may be influenced by multiple factors other than the performance of the index or ETF. This includes, but is not limited to, the volatility of the index or ETF, the dividend rate on the index or ETF, and the level of interest rates.

Capped Upside

If the price of the Index or ETF appreciates more than the cap level:

The 10% Buffer Strategy seeks to provide a total return that equals the predetermined cap level.

Upside Participation

If the price of the Index or ETF appreciates, but less than the cap level:

The 10% Buffer Strategy seeks to provide a total return that increases by the percentage increase of the Index or ETF, up to the predetermined cap level.

10% BUFFER

If the price of the Index or ETF decreases by 10% or less:

The 10% Buffer Strategy seeks to provide a total return of zero.

Buffered Downside

If the price of the Index or ETF decreases by more than 10%:

The 10% Buffer Strategy seeks to provide a total return loss that is 10% less than the percentage decrease in the price of the Index or ETF with a maximum loss of approximately 90%.

A laddered portfolio of Buffer Strategies

Investing in a Buffer Strategy with a single maturity as is commonly done in structured notes or annuities comes with acute timing risks. To better understand these timing risks, click here.

The Fund invests in a laddered portfolio of 12 Buffer Strategies with maturities varying from one to 12 months. Each month, a Buffer Strategy matures and is rolled forward for another 12 months. This allows the buffer and cap levels to reset and stay current to the prevailing market conditions for a portion of the Fund's investment.


Learn more about laddering
Where It Fits in the Portfolio
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Where It Fits in the Portfolio

The Fund can fit in two places in an investor’s portfolio:

  • Low Risk/Hedged Equity
    A common way to reduce downside risk is to reduce allocation to equities. However, this creates the risk of missing out on potential upside. The Fund offers an alternative approach that seeks to deliver some benefits of upside from equities with reduced downside risk, allowing investors to stay persistently invested.
  • Alternatives
    The Fund’s risk/return characteristics provide lower downside risks through capping some upside, similar to alternative investments such as hedged funds. As a result, the Fund may be used as a potentially cost-competitive replacement to hedge funds.
Where It Fits in the Portfolio
Additional Resources & FAQs
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Additional Resources & FAQs

FAQs

What is an option?  

What is a call option?  

What is a put option?  

How does the Buffer Strategy utilize options?  

Is The Vest U.S. Large Cap 10% Buffer Strategies Fund a structured product, structured annuity or mutual fund?  

What market conditions are ideal for the Buffer Strategy?  

What market conditions are challenging for the Buffer Strategy?  

Where could investors consider using The Vest U.S. Large Cap 10% Buffer Strategies Fund in their portfolios?  

Why doesn’t the Fund invest in one single Buffer Strategy, as is common with structured notes and annuities?  

Why does the Fund utilize a laddered portfolio of 12 Buffer Strategies, and how does it work?  

When and how are the buffers and caps set?  

What are the tax implications of the strategy?  

Fund Facts & Stats
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Fund Facts & Stats

Fund Snapshot

  • Ticker   BUIGX
  • CUSIP   98148J758
  • Inception Date   August 23, 2016

Expenses

  • Gross Expense Ratio 1.06%
  • Net Expense Ratio* 0.95%

*Vest Financial LLC (the “Adviser”) has contractually agreed to reduce expenses until February 28, 2025.

Holdings

Estimated Distributions

Contact Us
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Contact Us

See how this fund can complement your investment strategies. Call us at 855-979-6060, send a message using the form below, or email us at info@vestfin.com for a quick response.

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Important Disclosures, Please Read

Investors should consider the investment objectives, potential risks, management fees and charges and expenses carefully before investing. This and other information is contained in the Fund’s prospectus, which may be obtained online, or by calling 855-505-VEST (8378). Please read the prospectus carefully before investing. Distributed by Foreside Fund Services, LLC, Portland, ME. Member FINRA/SIPC.

View this firm's background on FINRA's BrokerCheck.

On January 2, 2024, the Fund’s name changed from Cboe Vest U.S. Large Cap 10% Buffer Strategies Fund to Vest U.S. Large Cap 10% Buffer Strategies Fund. This is a change in name only; the Fund’s objective and principal investment strategy remain the same.

Any comments or statements made herein do not reflect the views of Vest Group Inc. or any of their subsidiaries or affiliates.


Risk Factors

Derivative Securities Risk. The Fund may invest in derivative securities. These financial instruments derive their performance from the performance of an underlying asset or index and can be volatile. The Fund could experience a loss if derivatives do not perform as anticipated, or are not correlated with the performance of other investments which are used to hedge, or if the Fund is unable to liquidate a position because of an illiquid secondary market.

FLEX Options Risk. The Fund bears the risk that the Options Clearing Corporation (OCC) will be unable or unwilling to perform its obligations under the FLEX Options contracts. Additionally, FLEX Options may be less liquid. Furthermore, the values of Flex Options do not increase or decrease at the same rate as the Index, ETF, or their underlying securities, which may cause the Fund’s NAV to fluctuate.

Risks of Investing in Other Investment Companies and Underlying Funds. The Fund will incur higher and duplicative expenses when it invests in mutual funds and exchange-traded funds (“ETFs”). There is also the risk that the Fund may suffer losses due to the investment practices of the underlying funds.

Please see the prospectus for more information regarding these and other risks associated with the Fund.

© 2024 Vest Group Inc. All rights reserved.
Vest Trademarks & Copyrights

Vest Financial LLC is an investment advisory firm registered with the U.S. Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training. Vest Financial LLC is a wholly owned subsidiary of Vest Group Inc. Vest offers institutional-quality Target Outcome Investments(R) built on the backbone of its unique investment philosophy—that strive to buffer losses, amplify gains or provide consistent income — to a diverse spectrum of investors.