Goldman Sachs Asset Management launches new defined outcome ETFs



Oct 26 (Reuters) – Goldman Sachs Asset Management (GSAM) has launched a pair of defined outcome exchange-traded funds (ETFs), a group of products that use options strategies to offer upside exposure to stocks while cushioning downside risk.

The new funds – the Goldman Sachs S&P 500 Core Premium Income (GPIX.O) and the Goldman Sachs Nasdaq 100 Core Premium Income ETF (GPIQ.O) – will use an options overlay strategy to limit downside risk and generate income, said Michael Crinieri, global head of ETFs at GSAM.

Managers will sell upside exposure on a portion of the total portfolio, and use that income to offset downside market risk and increase yield.

As market volatility rises, so would income from the options strategy, Crinieri said. In a volatile market, GSAM may only need to write options on 25% of the portfolio to produce the yield it wants to generate, leaving investors to capture the full upside of the remaining 75%.

When markets are rangebound, that percentage of the portfolio with an options overlay may rise as high as 75%. Typically, Crinieri said, it should hover around 40% in each of the funds.

Defined outcome products are a relatively new corner of the ETF landscape, although the options strategies themselves are well established. According to data from Morningstar Direct, assets in these funds – sometimes also referred to as ‘buffer ETFs’ – now approach $25 billion, up from only $108 million as of late 2018.

“We started looking at developing enhanced income products like these in 2005,” said Monali Vora, head of wealth investment solutions at GSAM. “Clients want this kind of consistent and predictable income.”

In a report published in January, Morningstar noted that the typical defined outcome ETF carried a fee of between 0.75% and 0.85%. GSAM said its fees will be 0.29%.



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Edmund Shing, PhD

Global Chief Investment Officer
BNP Paribas Wealth Management

Edmund has over 29 years of experience in financial markets in a wide variety of positions, ranging from proprietary trading to portfolio manager in a number of financial institutions in London and Paris.  He previously held the role of Global Head of Equity and Derivative Strategy at BNP Paribas in London from 2015 to 2020, and has been Chief Investment Officer at BNP Paribas Wealth Management since November 2020.

Edmund is responsible for piloting our investment strategy and will continues to rollout out recommendations and themes with actionable advice that brings our expertise to our clients and support to our client-facing teams.  In this time of change, his expertise in following and anticipating markets is a true value added for both our customers and those at Wealth Management who serve them.

Edmund has a PhD in Cognitive and Computing Science from the University of Birmingham in the United Kingdom, and has done advanced studies in Knowledge-Based Systems and in Experimental Psychology.  He is an EFFAS-certified financial analyst. He has also authored the book “The Idle Investor” published by Harriman House in 2015, proposing 3 simple investment strategies that take only a few minutes to execute per month.

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