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UBS AM launches four defensive equity ETFs tracking option-selling indices


The funds will target either the S&P 500 and the EURO STOXX 50

The funds will target either the S&P 500 and the EURO STOXX 50

UBS Asset Management has launched four ETFs tracking option-selling indices, offering investors a “defensive view” on US and European equities.

The funds will target either the S&P 500 and the EURO STOXX 50 and will each be offered in a ‘covered call’ or a ‘put write’ strategy, with a fee of 0.29% for the US equity ETFs or 0.26% for the European equity ETFs.

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A covered call approach utilises a long position in the underlying equity index, combined with the weekly sale of call options on the same index. The sale generates a return through the premiums received, but any index performance above the price set on the option is sacrificed. This aims to generate returns through income from premiums and reduce downside risk.

A put write strategy utilises a long cash position combined with the weekly sale of put options, which generates a supplementary return to any income from the cash holding.

If the equity index rises, the return of the strategy is the sum of premiums received plus any income from the cash position.

If it falls below the price set on the put options sold – the strike price – the strategy will fall in line with equity markets, but the premium from the sale of the put options will offset the losses “to some extent”.

The defensive equity ETFs track rules-based indices administered and published by index provider Solactive.

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Clemens Reuter, head of ETF and passive investment specialists at UBS Asset Management, said: “Equity markets have been volatile over time and, as a result, may expose investors to significant downside risk.

“Systematically selling options on major stock indices is a way to generate income, reduce downside risk and benefit from that volatility.

“With this launch, UBS AM ETFs exemplifies its ability to provide innovative solutions to clients, allowing them to position themselves in any kind of market environment, including acting on market views other than outright beta.”



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