Investment manager CBOE Vest has launched the CBOE Vest S&P 500 Enhanced Growth Strategy Fund (ENGIX). It is designed to track the CBOE S&P 500 Enhanced Growth Index Balanced Series (SPEN).
In a release CBOE Vest said common strategies focusing on enhanced upside performance usually employ leverage while leaving investors prone to larger losses. The fund’s enhanced growth strategy aims to deliver twice the upside performance on the S&P 500 up to a variable cap while eliminating additional downside leverage.
“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,” CBOE Vest senior managing director Steve Neamtz said. “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.”
CBOE said that most S&P 500 growth periods produce maximum 20 per cent gains. Over the past 16 years S&P 500 price returns over a rolling 12-month period fell in that range 58 per cent of the time.
ENGIX invests in a series of 12 monthly rolling tranches of an “enhanced growth” strategy. After fees and expenses every tranche targets returns or losses which 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, aka the “tranche holding period”.
If the S&P 500 Index appreciates during the tranche holding period, the tranche seeks to provide a total return increasing by twice the percentage increase of the S&P 500 Index up to a maximum return determined at the beginning of the tranche holding period. Should the S&P 500 Index fall, the tranche seeks to provide a total return loss equal to the Index’s percentage loss.
ENGIX joins the S&P 500 Buffer Protect Strategy Fund and the Defined Distribution Strategy Fund in CBOE’s stable of mutual funds.