EMJN provides emerging markets exposure with a 15% downside buffer over a one-year period starting each June, trading some upside for protection against the first 15% of losses. Think of it as emerging markets with training wheels — you get most of the ride up but avoid the worst potholes.
How It Works
The fund uses a options collar strategy on emerging markets equities, buying puts 15% below the June starting price while selling calls to fund the protection. The buffer resets annually each June, creating a new one-year outcome period with fresh downside protection and a new upside cap. Between reset dates, the remaining buffer and cap levels fluctuate based on market movements and time decay.
Key Features
- 15% downside buffer protects against moderate emerging markets selloffs, unlike unhedged EM funds
- Annual June reset provides predictable entry points for tactical EM allocations
- Options-based structure means no currency hedging — you still get full FX exposure
Risks
- Losses beyond 15% hit dollar-for-dollar — a 25% drop means you're down 10%
- Upside cap could leave significant gains on the table in EM rallies (often 20%+ moves)
- Mid-period purchases get unpredictable buffer/cap levels — buying in January means unclear protection
Who Should Own This
Best for investors who want emerging markets exposure but can't stomach the full volatility — particularly those nearing retirement or with shorter time horizons. Works well as a 5-10% portfolio allocation for risk-conscious investors who'd otherwise avoid EM entirely. Not for those who can handle normal EM swings or need the full upside potential.