JVB Financial Group has entered into a partnership with Olden Lane Securities to make its first foray into the US structured unit investment trusts (UITs) with a range of target outcome funds, a new category of UITs developed by Olden Lane. Through combining US Treasuries and exchange-listed option contracts which reference exchange traded funds (ETFs) tracking broad-based equity indexes, target outcome funds can offer efficient exposure to equity-market benchmarks within certain risk parameters, such as protection against downside risk. UITs developed on Olden Lane's platform are designed to provide better liquidity and transparency and lower counterparty risk, versus similar products offered as structured notes, according to John G. Tessar (pictured), head of structured investments at JVB Financial.
"The new UIT is really akin to the leveraged buffered strategies you see in leveraged structured notes used in wealth management channels," said Tessar. "These terms are fairly standard for similar three-year strategies wrapped in a structured note."
JVB Financial is now offering its first series of 'Capped Performance Portfolio with Buffer Protection Linked to the SPDR S&P 500 ETF Trust' which seeks leveraged capital appreciation based on the three year price performance of the SPDR S&P 500 ETF Trust. The Trust's return will be subject to a 25% cap and 15% buffer for downside protection, before fees and expenses.
Tessar expects the strategy will resonate with advisors and broker dealers because the structured of the product "has been a very popular structure for years".
"We've seen advisors and portfolio managers invest hundreds of millions of dollars in this strategy in the form of structured notes," said Tessar. "Through our partnership with Olden Lane, we can now offer a similar strategy in UIT form with improved price transparency, daily pricing and liquidity, and reduced counterparty risk."
JVB's move to enter the UIT space follows the launch earlier this year of Alaia Capital's Market Linked Trust (MLT) platform which will concentrate on the issuance of UIT series that deliver defined payoffs at maturity linked to particular exchange-traded funds (ETFs). The first UIT launched by Alaia tracks the performance of the SPDR S&P 500 ETF with a maturity of two years and a 2x leverage factor on the ETF up to a maximum return of 19%, and 10% downside protection.
The new platform adds to recent developments in this segment where CBOE Vest has been at the forefront of a number of initiatives and filed the first ever Structured Unit Investment Trust (Suit). The upcoming launch of the firm's structured unit investment trust (SUIT) range which has been developed in partnership with Elkhorn Investments, remains on track and awaiting the green light from the US Securities & Exchange Commission.
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