m+ funds, a financial services firm in Darien, Conn., has launched a suite of funds in which some provide protection from market downturns while others allow enhanced growth in up markets.
The funds are described as “defined-outcome investing” by Steve Houston and Oscar Loynaz, creators of the funds.
“The funds offer transparency and liquidity, but also offer protection from the downside of the market,” Houston said. The funds are designed to give advisors a tool for shaping their clients’ portfolios based on how much growth or protection they want, Loynaz noted.
M+ funds come in three categories: growth, balanced and preservation. For one such preservation fund, investment losses are limited to 5 percent in a down market while gains are capped at 27 percent.
For the growth category, m+ funds offer exposure to a broad-based market ETF over a fixed period of time, usually ranging from one to three years. If the ETF has generated a positive price return at the end of the period, the investor receives a multiple of the return—for example, 1.5 times. If the ETF has generated a negative return, the investor will experience the same loss as the ETF.
For the balanced category, m+ funds provide enhanced upside on a specific ETF, which is generally up to a capped amount. But in exchange, the balanced fund provides a buffer or insulation from a down market, which usually ranges from a 10 percent to 15 percent buffer.
Fees for these various funds across all categories range from 50 basis points to 60 basis points a year, which are relatively low versus other types of defined-outcome products.
The portfolio holdings in m+ funds include put and/or call options, which enable the fund to pay the defined outcomes.
The minimum investment is $5,000 and investments can be increased or decreased at any time, which sets this type of defined-outcome product apart from annuities or structured notes, Houston said. The funds are offered through brokers and fee-based advisors.
M+ funds are designed to let advisors customize portfolios based on how much risk the advisors’ clients are willing to take in a volatile market.