On Monday, Rosemont, IL-based asset manager TrueMark Investments today launched MARZ, the ninth ETF in the True-Shares structured outcome product suite. The TrueShares Structured Outcome ETF (MARZ) is sub-advised by SpiderRock Advisors, a Chicago-based asset management firm specializing in option overlay strategies.
The fund seeks to provide investors with structured outcome exposure to the S&P 500 Price Index. TrueMark believes its structured outcome ETF suite is the first of its kind to offer built-in downside buffers with uncapped upside participation.
MARZ’s structure allows for the potential of an asymmetric return profile. The fund seeks to provide investors with returns (before fees and expenses) that track the S&P 500 Price Index while seeking to provide a buffer of 8-12% on that index’s losses over the fund’s one-year investment period. In practice, the fund adviser will target the buffer at 10% of index declines over the investment period following the first day of trading while also allowing for uncapped upside participation. Additionally, MARZ’s expense ratio is 0.79%.
“The last twelve months have ushered in market conditions that investors haven’t seen in decades. Increased volatility, low-yields, and a relentless bull have increased demand for new portfolio tools to help investors maintain much-needed equity participation as they stare down the looming uncertainty of a post-pandemic economy,” said Michael Loukas, CEO at TrueMark Investments. “This sort of environment can be very frustrating to navigate solely using traditional equity index funds, which is why we keep expanding our lineup of structured outcome ETFs. We believe that MARZ’s combination of a built-in downside buffer and uncapped upside participation is a timely portfolio construction tool that is well-suited for today’s challenging market conditions.”
As noted, MARZ is the ninth monthly series in the True-Shares Structured Outcome ETF suite. For ease of investor use, each series will roll into a new investment position at the end of a year- long term, at which point the downside buffer and upside participation will reset based on current options pricing. Each respective ETF symbol remains the same.
“As this period of market uncertainty continues to unfold, revealing the clear potential benefits of structured outcomes products, we are thrilled to be partnering with TrueMark Investments as they bring their ninth ETF in their structured outcome suite to market,” said Eric Metz, fund portfolio manager and Chief Investment Officer at SpiderRock Advisors. “We believe the ability to create an attractive risk-reward investment profile in a daily-traded, cost-effective vehicle should put these ETFs top-of-mind for investors looking to gain prudent large-cap, U.S. equity exposure.”
Navigating Today’s Equity Market
Expanding on this further, as far as what makes today’s equity market particularly difficult to navigate for younger buy-and-hold investors, Loukas states, “There are always challenges when you start to invest in the markets. There is definitely a learning curve, and every young investor makes mistakes along the way ey can learn from. Entering the market today is easier than it has ever been, with free trading, the ability to own fractional shares in a basket, and trading at your fingertips on your phone. The rapid increase of access to markets over the past few years has been astonishing.”
Loukas continues, “With this access comes unique challenges that young investors in the past never faced. Being a buy-and-hold investor means having discipline in the market, and the changes over the past few years have made that more difficult. Free trading means that you don’t have that fee associated with entering a position, but you also don’t have that hurdle to exit. Trade costs used to be onerous, and they made investors think twice about entering or exiting a position.”
“In a very real way, trade costs taught investors to be committed to a trade and learn the discipline of holding a position through the day-to-day noise in the market. A bigger challenge is the amount of information young investors have to deal with. A young buy and hold investor with a position in the S&P 500 can see hundreds of ideas for trades online in free research, message boards, and other less reputable channels. All of this noise comes at a young buy-and-hold investor with big promises of gains. The discipline to stay the course and not trade too and from every “great” idea that comes at you has never been more challenging.”
“Finally, young investors are just starting to build a nest egg. Whatever the long-term purpose, it is a smaller amount that needs to grow to have the capital base they want. You can swing for the fences with that kind of investment, but you’ll fail more often than not. A better way, in our opinion, is to make it easier to ride through day to day noise in the market. Structure Outcome products do a great job of giving diversification that young investors need while managing the volatility they face in the day-to-day market. In particular, young investors who are trying to build up their investment base, should look at uncapped products like the TrueShares Structured Outcome series that give you some protection on the downside and give you unlimited upside participation at some rate. It really gives buy and hold investors a way to enter the market and manage volatility.”
When considering how older investors can take advantage of market timing without sacrificing the safety of their nest egg, Loukas notes how “Timing the market is not something many investors would claim they can do effectively. And older investors face unique challenges today. With interest rates near zero, it is hard to put a large amount of money in bonds. A decade of bull markets has made it difficult for older investors to stay on the sidelines when they see fixed income in the future that doesn’t yield very much. Structured outcome products give a solution to this problem. By buffering the downside by some amount and allowing you to participate in the upward market moves, these products let older investors gain exposure to equities while managing their exposure and risk.”
Getting back to the new MARZ ETF’s expected risk/return profile, there is a role it can serve in existing portfolios. As Loukas explains, “The structured outcome series from TrueShares has been fairly consistent in its offerings since we started back in July. Typically we have been delivering upside participation of 78-88%, and we are currently expecting a number in the bottom half of that range. The 10% buffer is set in the option structure. Put them together and you have a risk profile that is about 20-25% lower than the overall market.”
He continues, “We see MARZ and all the TrueShares Structured Outcome portfolios as a core holding for investors looking to manage their equities’ volatility. This can have implications for any equity investor. From a purely equity perspective, if you have concerns about the level of the market or increased volatility in the market, these products will be effective in reducing your portfolio’s volatility equities without having to go to the sidelines. From a portfolio construction perspective, it is hard to rationalize a 60/40 portfolio anymore. Interest rates near 0% just don’t offer much for that much of a portfolio using structured outcome, investors can redo their equities, the risk profile of their equities, and increase their equity exposure without increasing their risk profile. The TrueShares Structured Outcome ETFs offer a unique way to manage volatility and risk in investor portfolios.”
For more information, visit TrueMarks’ website.
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