APRP delivers S&P 500 returns with a twist: it absorbs the first 12% of losses over a one-year period starting each April, but caps your upside at a predetermined level. Think of it as portfolio insurance that you pay for by giving up some gains.
How It Works
The fund uses a options collar strategy, buying S&P 500 exposure while simultaneously purchasing protective puts 12% out of the money and selling call options to fund the protection. Each April, the options reset with new strike prices based on prevailing market conditions. The cap level varies each year depending on volatility and interest rates when the options are priced.
Key Features
- Protects against the first 12% of S&P 500 losses during each April-to-April outcome period
- Cap levels reset annually and typically range from 10-20% depending on market volatility
- Options positions are held to maturity, eliminating path dependency within each outcome period
Risks
- Losses beyond 12% hit dollar-for-dollar — a 25% S&P decline means you're down 13%
- Missing out on gains above the cap can be painful in strong bull markets (20%+ years)
- Buying mid-period means inheriting the existing cap/buffer levels, which may be unfavorable
Who Should Own This
Best for investors within 5-10 years of retirement who want equity exposure but can't stomach another 2008-style drawdown. Works well as a 20-30% portfolio sleeve for those who'd otherwise hold cash or bonds out of fear. Not for young accumulators who should be praying for market crashes to buy cheap shares.