Aptus Capital Advisors rolled out its third exchange traded fund, an actively managed style that incorporates a combination of a laddered bond portfolio strategy with options on U.S. equities to help investors meet their income needs.
Aptus launched the actively managed Aptus Defined Risk ETF (Cboe: DRSK), which has a 0.78% expense ratio.
John D., “JD”, Gardner, Chief Investment Officer and Managing Member at Aptus Capital Advisors, and Beckham D. Wyrick, Portfolio Manager and Chief Compliance Officer at Aptus Capital Advisors, will manage DRSK’s portfolio.
Aptus Defined Risk ETF will try to generate income and capital appreciation by investing in 90% to 95% of its assets in investment-grade corporate bonds and the remainder in large-cap U.S. stocks while limiting downside risk, according to the fund’s prospectus.
Specifically, the fixed-income portion is comprised of U.S. dollar-denominated, investment-grade corporate debt comprised of BlackRock’s iShares iBond ETF series with maturities roughly evenly spaced across each of the next seven to eight years. The investment is also known as a bond ladder strategy. The iBonds ETFs have a final payout in their maturity year and have regular monthly interest payments along the way.
Meanwhile, the remaining 5% to 10% of the portfolio holds at-the-money call options on 10 to 12 large-cap U.S. stocks or on one or more other U.S. large-cap ETFs, which will further help generate income for the investor.
A call option gives the purchaser the right to purchase shares of the underlying security at a specified price, or “strike price”, prior to an “expiration date”. The purchaser pays a cost or premium to purchase the call option. In the event the underlying security appreciates in value, the value of the call option will generally increase, and in the event the underlying security declines in value, the call option may end up worthless and the premium may be lost.
For more information on new fund products, visit our new ETFs category.