If the reference asset is down 20%, the ETF would be down just 10% because the first 10% of loss is protected by the buffer.
Target Outcome ETFs
How do Target Outcome ETFs work?
Target Outcome ETFs are actively managed ETFs that seek to provide targeted exposure to an underlying reference asset. The ETF is set up to provide a predetermined investment outcome, equipped with a feature to remove some of the uncertainty associated with investing.
The Target Outcome Buffer Series ETFs are designed to help equity investors maintain a level of protection in down markets, by seeking to provide a defined downside buffer, over a specified Target Outcome Period. At the same time the strategy looks to take advantage of growth opportunities in up markets up to a predetermined cap. The cap and buffer are reset at the end of each Target Outcome Period. However, the funds may be held indefinitely, providing investors a potential buy and hold investment opportunity.
Potential return scenarios at the end of a target outcome period
The hypothetical examples show possible outcomes across different scenarios.
The examples assume ETF shares are purchased on the first day of the Target Outcome Period and held until the end of the period.
Reference Asset
Buffered Range
Target Outcome ETF
Performance Cap
10% Buffer
Negative Scenario
BUFFER EXCEEDED
Negative Scenario
Negative Scenario
WITHIN BUFFER RANGE
Negative Scenario
Positive Scenario
WITHIN CAP
Positive Scenario
Positive Scenario
CAP EXCEEDED
Positive Scenario
15% Moderate Buffer
Negative Scenario
BUFFER EXCEEDED
Negative Scenario
Negative Scenario
WITHIN BUFFER EXCEEDED
Negative Scenario
Positive Scenario
WITHIN CAP
Positive Scenario
Positive Scenario
CAP EXCEEDED
Positive Scenario
25% Deep Buffer
Negative Scenario
BUFFER EXCEEDED
Negative Scenario
Negative Scenario
WITHIN BUFFER RANGE
Negative Scenario
Positive Scenario
WITHIN CAP
Positive Scenario
Positive Scenario
CAP EXCEEDED
Positive Scenario
Portfolio construction
Target Outcome ETFs are actively managed using a “target outcome strategy” which seeks to produce a predetermined investment outcome based on the performance of the underlying assets, through the use of FLEX Options.
1 Year return profile example
Target Outcome ETFs offer exposure to a reference asset (underlying ETF) that is based on a market index and has the following components.
Upside Cap
The “Cap” is a limit on the possible return that the Buffer ETF can provide at the end of the Target Outcome Period. Investors do not participate in returns on the reference asset outside of the maximum upside cap.
Downside Buffer
The “buffer” is designed to avoid losses inside the buffer range.
Downside after Buffer
Investors participate in losses outside of the buffer range.
How do they work?
| Sample Portfolio | Option Position | Type | Purpose | Expiration |
|---|---|---|---|---|
Set U.S. Equity Exposure | Purchase | Call | Buying a deep in-the-money call (near 0%) sets the equity exposure. | 12 months expiration dates |
Set Buffer Limit | Purchase (A) | Put | Buying a put sets the downside buffer. | 12 months expiration dates |
Write (B) | Put | Selling a put, where your buffer ends, partially funds the downside buffer. | 12 months expiration dates | |
Set Upside Cap | Write (C) | Call | Selling an out-of-money call funds the downside buffer. | 12 months expiration dates |
Target Outcome Products
Please click here for definitions of the above terms, or contact us.
The Value / Return performance above is based on the start of the relevant target outcome period. Performance is shown in the base currency of the share class which is in USD. Therefore, information provided may not accurately reflect the currency in which investors make an investment into the fund. Returns may increase or decrease as a result of currency and exchange rate fluctuations. Performance can go up as well as down, and investors may lose some or all of their capital. Please refer to the 'Risks' section in the KID/KIID, related supplement, and prospectus, on risks associated with an investment in the fund.
Please Note: The Fund values shown are based on the Fund’s bid/ask midpoint as of the date and time stated.
