- Fund is designed to track the CBOE S&P 500 Enhanced Growth Index Balanced Series (SPEN).
- The Enhanced Growth strategy 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 losses.
McLean, Virginia, January 11, 2017 — CBOE Vest, an investment manager focused on Target Outcome Investment strategies, today announced it has launched the CBOE Vest S&P 500 Enhanced Growth Strategy Fund (ENGIX). The fund is designed to track the CBOE S&P 500 Enhanced Growth Index Balanced Series (SPEN).
Conventional strategies that aim to deliver enhanced upside performance typically accomplish this through leverage. However, such approaches leave investors exposed to enhanced losses as well. By using options, the Enhanced Growth Strategy employed by the Fund seeks to deliver 2x upside performance on the S&P 500 up to a variable cap, without additional leverage on the downside.
"Enhanced growth strategies are proving quite popular with investors, especially in 'the new normal' of lower-than-expected global economic growth and muted appreciation of asset prices," said Steve Neamtz, Senior Managing Director at CBOE Vest. "Offering the possibility of enhanced returns in exchange for limited outsized returns offers a potentially viable alternative for growth in today's growth challenged environment." Data shows that when the S&P 500 experiences growth, more often than not, it's between 0% and 20%: over the past 16 years, S&P 500 price returns over a rolling 12-month period have been between 0% to +20% roughly 58% of the time.
Designed to enhance growth while keeping losses in line with the market and limiting returns to be below a cap, the Enhanced Growth Strategy Fund invests in a series of 12 monthly rolling "tranches" of an "Enhanced Growth" strategy. Each tranche seeks to target, before fees and expenses, returns or losses that are a function of the price performance of the S&P 500 Index from the third Wednesday of that month to the third Wednesday of the same month the following year (the "tranche holding period"). Over the tranche holding period:
- If the S&P 500 Index appreciates: The tranche seeks to provide a total return that increases by twice the percentage increase of the S&P 500 Index, up to a maximum return that is determined at the start of the tranche holding period.
- If the S&P 500 Index decreases: The tranche seeks to provide a total return loss that is equal to the percentage loss on the S&P 500 Index.
"We're thrilled to be able to bring this exciting new strategy to market, because of the tremendous opportunities it stands to offer growth-hungry investors," said Neamtz. "Investors want to participate in market gains, and want to maximize their gains when possible, but they don't want to be on the hook for leveraged losses on the downside as well. We think this could be the answer they're looking for."
ENGIX is the third mutual fund launched by CBOE Vest, following the August launch of the CBOE Vest S&P 500 Buffer Protect Strategy Fund (BUIGX) and the October launch of the CBOE Vest Defined Distribution Strategy Fund (VDDIX).
The Enhanced Growth Strategy's approach, which seeks to amplify positive returns, is unique when compared with other funds' strategies aimed at enhancing growth. While the investment manager seeks to deliver the returns of the Enhanced Growth strategy for each tranche, the strategy may not work as intended. The enhanced growth intended by the strategy is not guaranteed and it is possible to lose more than the targeted one-to-one losses on the downside.
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 that seek a higher level of predictability than 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) 979-6060. Please read the prospectus carefully before investing. Distributed by First Dominion Capital Corp., Richmond, VA. Member FINRA.
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. FLEX Options Risk. The Fund expects to utilize FLEX Options are 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 FLEX Options contracts. Additionally, FLEX Options may be less liquid than certain other securities such as standardized options. In less liquid market for the FLEX Options, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. FLEX Options are also subject to the Derivative Securities Risk described above. 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. When the Fund invests in an underlying mutual fund or ETF, the Fund will be subject to substantially the same risks as those associated with the direct ownership of securities comprising the underlying funds or index on which the ETF or index mutual fund or other vehicle is based and the value of the Fund's investments will fluctuate in response to the performance and risks of the underlying investments or index. In addition to the brokerage costs associated with the fund's purchase and sale of the underlying securities, ETFs, mutual funds and other vehicles incur fees that are separate from those of the Fund. As a result, the Fund's shareholders will indirectly bear a proportionate share of the operating expenses of these investment vehicles, in addition to Fund expenses. ETFs are subject to additional risks such as the fact that the market price of its shares may trade above or below its NAV or an active market may not develop. The Fund has no control over the investments and related risks taken by the underlying funds in which it invests. Non-Diversification Risk. The Fund is non-diversified. The performance of a non-diversified fund may be more volatile than the performance of a diversified fund. Leverage Risk. The Fund may seek to gain exposure to certain securities in excess of 100%. Such exposure will make each Fund more sensitive to movement in the value of those instruments. In particular, investments in options and derivative instruments may provide the economic effect of financial leverage by creating additional investment exposure such that increases or decreases in the value of the Fund's portfolio will be magnified. Amplified Returns Risk. Each monthly tranche that is constructed within the Fund's portfolio seeks to achieve its objective of enhanced participation in price appreciation up to a predetermined level of the S&P 500® Index and one-to-one participation in price depreciation of the S&P 500® Index by purchasing and selling call options to gain twice the exposure to the price of the S&P 500® Index in a predetermined price range. Each tranche seeks to deliver the targeted enhanced upside participation in the predetermined price range based on the price performance of the S&P 500® Index from the third Wednesday of the month to which the tranche belongs to the third Wednesday of the same month the following year. For time periods other than from the third Wednesday of the month to which the tranche belongs to the third Wednesday of the same month the following year, the tranche could experience more than one-to-one losses in market declines. Credit risk. Credit risk is the risk an issuer, guarantor or counterparty of a security in the Fund is unable or unwilling to meet its obligation on the security. The OCC acts as guarantor and central counterparty with respect to the FLEX Options. As a result, the ability of the Fund to meet its objective depends on the OCC being able to meet its obligations. Liquidity Risk. Liquidity risk is the risk that the Fund may be unable to sell a FLEX Option. New Fund Risk. The Fund is recently formed. Accordingly, investors in the Fund bear the risk that the Fund may not be successful in implementing their respective investment strategies, may not employ a successful investment strategy, or may fail to attract sufficient assets to realize economies of scale, any of which could result in the Fund being liquidated at any time without shareholder approval and at a time that may not be favorable for all shareholders. Such liquidation could have negative tax consequences. Trading on Select Exchanges. Because of certain potential limitations of the Investment Company Act of 1940 associated with trading options on the CBOE and any other exchanges owned or controlled by CBOE Holdings, Inc. ("CBOE Exchanges"), the Fund will not effect transactions in options that are traded on any CBOE Exchanges until such time that appropriate exemptive and/or no-action relief is obtained from the Securities and Exchange Commission ("SEC") and/or its staff by the Adviser, the CBOE and/or any mutual funds advised by the Adviser. Until such time, the Advisor may trade options on multiple other exchanges.