ARLI provides international equity exposure with a 15% downside buffer over a one-year period starting each April, while allowing unlimited upside participation minus the cost of the protection.
How It Works
The fund uses a options overlay on international equity exposure to create defined outcomes. At each April reset, it constructs a portfolio that absorbs the first 15% of losses while maintaining uncapped upside potential. The strategy resets annually, with new buffer levels and participation rates based on prevailing options prices at reset.
Key Features
- 15% downside buffer protects against first tier of international equity losses
- Uncapped upside participation unlike most buffer ETFs that limit gains
- Annual April reset provides fresh protection levels each year
Risks
- Losses beyond 15% hit dollar-for-dollar - a 25% market drop means 10% fund loss
- Protection only applies if held for full outcome period - mid-period buyers get partial or no buffer
- International exposure adds currency risk that buffer doesn't protect against
Who Should Own This
Best for investors wanting international exposure but nervous about near-term volatility, particularly those planning major expenses in 12-18 months. Works well as a satellite position for risk-averse investors who'd otherwise avoid international stocks entirely but can accept giving up some upside for downside protection.