SOS Shield® - Structured Outcome Strategies

Defining Risk, Seeking a Structured Outcome

 

We created the Structured Outcome Strategies (SOS Shield®) to provide investors with equity market appreciation, up to a cap, and a downside shield for a specified period, seeking to provide a more structured outcome.

 

The SOS Shield® Series are separately managed accounts, available in 3 variations, all of which include:

  • Underlying equity holding (passive, held for a 12-month Outcome Period)
  • Upside Cap (varies based on product and market conditions)
  • Downside SOS Shield® (Conservative, Moderate, FLEX)

Our SOS Shield® strategies reflect our commitment to provide risk management solutions and options-based strategies that accommodate different investor risk tolerances and investment objectives.

Distinct Benefits & Advantages

Structured Portfolio, Targeted Outcome:  Select a desired target for market exposure with downside shield, over a specified target outcome period, to align with investor risk tolerance and investment objectives.

Lower Management Fees:  50 bps Management fee is substantially lower than competitive products and available on multiple platforms. 

Tailored Start Date: Each strategy is structured for an individual client within a SMA, allowing for individualized shield and defined outcome targets (not commingled), as well as, investment start date per account. Each SMA is tailored to the investor’s objectives.

Limited Volatility: Provide equity exposure with less volatility. Exposure to the price return of S&P 500 combined with index options may provide a less volatile return profile than the underlying asset, and when combined with a downside shield, may offer an attractive portfolio management tool.

Perpetual Structure: The cap and shield are reset annually at the end of each outcome period. However, the SMA may be held indefinitely, providing investors a buy and hold investment opportunity.

Options & Hedging Experts: Managed by the leaders in portfolio hedging and options strategies since 1997.  

Portfolio Construction

The portfolio seeks to provide a structured range of investment outcomes over a specified time period by combining 3 components: equity exposure, downside shield, and an upside cap. The structured outcome may only be realized for investors who remain invested throughout their specified period.

1. Equity Exposure

The portfolio will purchase a low strike call option (near zero), replicating a long position in the price returns of an underlying equity ETF, such as the S&P 500.

2. Downside Shield

The portfolio will buy a put option on the S&P 500 and then simultaneously write (sell) a put option at a price below that is equal to the predetermined shield levels for each strategy. The purchased put option provides a downside SOS Shield®, while the written put option will stop the shield at the predetermined level.

3. Upside Cap

The portfolio will write (sell) call options with strike prices at the capped level, generating the premium to help pay for the downside shield. Writing a call gives the seller the obligation to sell shares of the underlying asset at a strike price that is set above the current market price.  If S&P 500 increases to the strike price of the written call option by expiration, the strategy will hit its cap and no longer participate in any further gains.

How Does It Work?

Define Risk, Structure a Targeted Outcome

 

SMAs charge fees and expenses.  No such fees or expenses were deducted from the hypothetical return scenarios shown. Actual returns would be lower.  The upside cap for a strategy is determined at the inception date of the outcome period in each calendar year. The cap investors will experience may be different than what is illustrated herein. ** The SOS ShieldTM 10 and 20 series seek to shield investors against losses from 0%-10% and 0%-20% respectively, over the outcome period. There is no performance guarantee.

The SOS Shield® Series provides upside participation up to a cap over a 12-month outcome period, while offering protection from losses down to a defined shield level. Investors would participate in losses beyond the shield level, should the Outcome Period end with the market even lower. The chart above refers to a hypothetical cap and is for illustration purposes only.

Upside to a Cap
+ Shield Against Losses

Over the Next 12 Months, Where Will S&P 500 End Up?

 

The SOS Shield® strategies offer investors a little more certainty in uncertain times.

 

  • If the market goes up, participate fully up to a preset performance cap.
  • If the market falls and ends lower, be shielded from losses down to a point.

Review the SOS Shield® series and latest performance caps.

Review SOS Shield® series reference tracking over time.

Our Objective – All About Outcomes

Our primary objective is fundamentally aligned with that of long-term investors = achieve desired outcomes.  That starts with seeking to reduce uncertainty and losses associated with equity investing.

 

Explore our suite of outcome-oriented investment solutions:

Important Disclosures:  The charts are for illustrative purposes only and are not indicative of any actual investment. The charts are intended to illustrate potential outcomes at the end of the outcome period and are based on hypothetical reference asset returns. The charts do not account for payment of fees and expenses. The strategy may not be able to achieve the hypothetical returns set forth above. The Structured Outcome Strategies (SOS Shield®) have characteristics unlike many other traditional investment products and may not be suitable for all investors. Investors in the SOS Shield® will bear all index losses exceeding the downside shield. Changes in market volatility can impact the performance cap from one defined outcome period to the next. The SOS Shield® are designed to provide point-to-point exposure to the price return of an index via a basket of Flex Options. As a result, any given SOS Shield® is not expected to move directly in line with the index during the interim period. Additionally, FLEX Options may be less liquid than standard options. In a less liquid market for the FLEX Options, the SOS Shield® may have difficulty closing out certain FLEX Options positions at desired times and prices. The performance cap, downside shield, and FLEX options should be considered before investing in the SOS Shield®. The upside cap for a strategy is determined at the inception date of the outcome period in each calendar year. The cap investors will experience may be different than what is illustrated herein. The Structured Outcome Strategies discussed above seek to shield investors against a range of losses, based on the specific SOS Shield® variation, from 0% to -20%, over the target outcome period.