APRT provides one-year downside protection against the first 10% of S&P 500 losses starting each April, while capping upside gains at a predetermined level. It's designed for investors who want equity exposure but are willing to trade away some upside for a cushion against moderate declines.
How It Works
The fund uses a options collar strategy, buying S&P 500 exposure while simultaneously purchasing put options 10% below the starting level and selling call options to fund the protection. The buffer and cap levels reset annually each April, with the exact cap determined by options pricing at reset. Between resets, the effective buffer and remaining cap change daily based on market movements.
Key Features
- 10% downside buffer resets each April, protecting against moderate corrections but not severe crashes
- Cap levels typically range 12-20% annually depending on volatility when the fund resets
- No expense ratio charged, as the options strategy costs are built into the cap structure
Risks
- Losses beyond 10% are unprotected — a 25% market drop means you lose 15%
- Missing rallies above the cap can be painful in strong bull markets, potentially lagging by 10%+ annually
- Buffer effectiveness depends on entry timing — buying mid-period means inheriting someone else's buffer position
Who Should Own This
Best suited for pre-retirees or conservative investors who fear a 2008-style correction but can't stomach sitting in cash. Works well as a 10-20% portfolio sleeve for those who want to stay invested but sleep better at night. Requires active monitoring to ensure you understand your current buffer and cap levels relative to the market.