Risk-reducing buffered ETFs that aim to take some of the danger out of investing in stock markets enjoyed a banner year in 2020 with a surge in the number of launches and assets under management.
However, a push by a grouping of the exchange traded fund industry’s biggest players could potentially derail the fast-growing sector by stripping funds of their designation as ETFs.
Buffered, or defined outcome, ETFs provide investors with a degree of downside protection if the stock market falls. In return, investors give up some of the potential gains, only receiving the return of the underlying index up to a fixed, preset cap if it rises over the contract period.