FT Cboe Vest U.S. Equity Moderate Buffer ETF – December
| Issuer: First Trust |
| Asset Class: Equity |
| TER: 75bps |
| Trading Currency: GBX |
| Pays Income: False |
| Listing Date: 24 Mar 2025 |
| Ticker: MARQ |
| ISIN: IE0006S0EBF2 |
This product is designed for investors seeking to participate in the growth potential of the U.S. large-cap equity market while mitigating downside risk. The strategy aims to match the price appreciation of a reference U.S. equity ETF, up to a prespecified cap, over a one-year outcome period. Simultaneously, it provides a buffer against the first 15% of losses in the reference asset during the same period. This defined outcome is achieved by investing in a portfolio of customized options contracts, specifically FLexible EXchange® Options (FLEX Options). The outcome period resets annually, commencing each December, at which point a new cap and the existing buffer are established for the subsequent twelve months.
This investment vehicle is particularly suitable for individuals with a moderate risk tolerance who are concerned about market volatility but do not want to forego equity exposure entirely. It can serve as a strategic component in a portfolio for those nearing retirement or for any investor looking to reduce the impact of market downturns. By accepting a cap on potential gains, investors receive a predetermined level of protection against losses, creating a more predictable investment experience. This structure offers a middle ground between the full risk of direct equity ownership and the lower potential returns of cash or fixed-income assets, making it a valuable tool for managing risk in uncertain economic climates.
Investors should be aware of several key characteristics. The buffer protects against the first 15% of losses; if the reference asset declines by more than this amount, the investor will participate in the losses beyond the buffer. The upside potential is limited by the cap, which is set at the start of each outcome period and is influenced by market conditions. To achieve the intended buffered returns, it is crucial to hold the investment for the entire one-year outcome period. Selling shares before the period ends will result in returns that may differ significantly from the defined outcome. As an accumulating share class, any dividends from the underlying holdings are automatically reinvested, which is advantageous for long-term capital growth.
