- Fund targets consistent monthly distributions of 5.25% annualized over one-month Treasury yields before fees and expenses
- Delivers unique returns not correlated to fixed income markets, neutral to equity markets’ performance
McLean, Virginia, October 18, 2016 — CBOE Vest, an investment manager focused on Target Outcome Investment strategies, today announced it has launched the CBOE Vest Defined Distribution Strategy Fund (VDDIX).
VDDIX seeks to generate consistent monthly distributions, non-correlated to equity or bond markets, of 5.25% annualized over the one-month Treasury yield, before fees and expenses, while preserving capital over the long term. VDDIX is the second mutual fund launched by CBOE Vest, following the August launch of the CBOE Vest S&P 500 Buffer Protect Strategy Fund (BUIGX).
“In the current low-interest-rate environment, the search for yield has pushed many investors to get involved in higher-yielding assets that may not be of the highest quality or long- duration bonds that may see negative price returns when interest rates rise,” said Steve Neamtz, Senior Managing Director at CBOE Vest Financial. “We believe this fund will appeal to those investors who are reaching for consistent distributions but are struggling in this low-interest-rate environment. It is our sincere hope that VDDIX enables investors to sidestep duration or credit risk in a rising rate environment.”
The Defined Distribution Strategy (“DDS”) employed by the fund begins every month by setting upper and lower bounds (“Target Range”) on the performance of the S&P 500 Index (“Reference Index”) over the calendar month. If the price of the Reference Index is within the Target Range at the end of the month, the DDS seeks to not suffer from a principal loss. If the Reference Index completes the month outside the Target Range, then DDS may decline in value. The strategy is implemented in the fund by selling and purchasing monthly options.
As compensation for the risk of loss from the DDS, the fund collects a predetermined level of net premium income from the sales and purchase of options. The fund seeks to optimize the Target Range to collect premium income to meet its monthly distribution target while minimizing the chance of losses.
“Target Outcome Investments focus on delivering returns designed around specific goals, rather than an arbitrary measure of risk or opportunity,” Neamtz continued. “VDDIX targets consistent monthly distributions and aims to take just enough risk to seek to achieve that goal. It’s a great way for investors to tap into predictable distributions uncorrelated to fixed-income markets and neutral to the equity markets’ performance. This fund is well-positioned to weather the rising interest-rate environment that many see on the horizon.”
About CBOE Vest
Through its two lines of business (asset management and technology licensing), CBOE Vest is dedicated to serving investment advisor and brokerage firms by bringing wider access to innovative Target Outcome Investment strategies. CBOE Vest’s products empower investors with targeted outcomes and a level of predictability unattainable with most other investments. Services available include managed accounts solutions, mutual funds for financial advisors and technology solutions for brokerage firms.
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 by calling (855) 505-8378 or by visiting www.cboevestfunds.com. Please read the prospectus carefully before investing. Distributed by First Dominion Capital Corp., Richmond, VA. Member FINRA.
Credit Risk. There is a risk that issuers and counterparties will not make payments on securities and other investments held by the Fund, resulting in losses to the Fund. In addition, the credit quality of securities held by the Fund may be lowered if an issuer's financial condition changes. Fixed Income Risk. The value of the Fund's investments in fixed income securities will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities. Derivative Securities Risk. The Fund may invest in derivative securities. These are financial instruments that derive their performance from the performance of an underlying asset or index. Derivatives can be volatile and involve various types and degrees of risks, depending upon the characteristics of a particular derivative. Derivatives may entail investment exposures that are greater than their cost would suggest, meaning that a small investment in a derivative could have a large potential impact on the performance of the Fund. 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. The market for many derivatives is, or suddenly can become, illiquid. Changes in liquidity may result in significant, rapid and unpredictable changes in the prices for derivatives. Options Risk. The Fund expects to utilize Options (including FLEX Options) issued and guaranteed for settlement by the OCC. The Fund bears the risk that the OCC will be unable or unwilling to perform its obligations under the Options contracts. Options are also subject to the Derivative Securities Risk described above. Risk of large moves. The Fund could lose significant value if the Reference Index moves by more than the monthly Range established by the Adviser. While the Fund is not designed to be correlated to the markets in general, dramatic move in the level of the Reference Index at option expiry relative to its level when the options are written could lead to significant losses to the Fund. Market Volatility Risk. The risk that the value of the securities in which the Fund invests may go up or down in response to the prospects of individual companies and/or general economic conditions. Price changes may be temporary or may last for extended periods. Defined Payout Risk. The Fund is expected to make monthly cash distributions under its defined payout objective. Because these distributions will be made from Fund assets and shareholders are generally not expected (but may elect to do so) to reinvest such distributions in additional Fund shares, the Fund’s monthly cash distributions will reduce the amount of assets available for investment by the Fund. It is possible for the Fund to suffer substantial investment losses and simultaneously experience additional asset reductions as a result of its distributions to shareholders under the defined payout objective. Moreover, even if the Fund’s capital grows over short, intermediate, or long periods of time, it is possible that such growth will be insufficient to enable the Fund to maintain the amount of its defined cash distributions without returning capital to shareholders. To the extent any portion of a distribution constitutes a return of capital, which constitutes all or part of a shareholder’s original investment in the Fund, this will reduce a shareholder’s cost basis in Fund shares and is not taxable to a shareholder until his or her cost basis has been reduced to zero. The Fund’s ability to preserving capital while making distributions is subject to market conditions at the time you invest and the length of time you hold shares of the Fund. For example, buying shares of the Fund when interest rates are low and stock prices are declining may result in lower monthly distributions and less capital preservation or appreciation in the Fund.