BUYSIDE STRATEGIES PEOPLE & FIRMS Cboe Vest Sees Demand Run Rampant For Protected Investments APR 7, 2020 By Elinor Comlay Investors poured more than USD1 billion into protection and risk-mitigation products managed or sub-advised by U.S. structured investments shop Cboe Vest during the first quarter this year. In fact, demand has been strong for protection or protection-oriented strategies in 1940 Investment CompanyAct funds since the beginning of the fourth quarter in 2018, said Karan Sood, chief executive of Cboe Vest. “Since then, there’s been steady demand for the production-oriented products in recognition of the fact that the market was ripe for a correction. And then there’s been a tremendously significant demand in the last two months,” he added. Cboe Vest offers its advisory services directly and through distributors in three formats: as exchange-traded funds, unit investment trusts and mutual funds. The ETFs have been the most popular, Sood said. Right now, the product that is attracting most new inflows is a downside buffer strategy. At the start of the year, investors were piling into the version that mirrors the SPDR S&P 500 ETF, with protection against the first 10% of losses, and a cap to the upside, Sood said. More recently, investors have been buying into a version that protects losses between -5% and -30% with an upside cap, he said, noting that this has become the biggest fund that Cboe Vest manges. Sood said he thinks the products are seeing record inflows for a couple of reasons. The liquidity, transparency and familiarity of the ETF format in particular right now is a big draw for investors watching the market meltdown affect even supposed safe-haven assets. The liquidity, in particular, makes a downside-protected ETF attractive compared to a protected product in an annuity or structured note wrapper, for instance. At the same time, the fact that volatility is so high allows Cboe Vest to structure the protected products with relatively high caps, meaning that investors are able to buy into a product that cushions them against losses but also gives them exposure to significant upside when the stock market rallies.