How does the TFJL ETF aim to achieve its investment objectives?

The TFJL ETF seeks to achieve its investment objectives by analyzing technical and fundamental market indicators to determine the current overall favorability of the market. During periods when the U.S. equity market is unfavorable, the fund may invest all or a portion of its assets in cash, cash equivalents, short-term fixed income ETFs, or even inverse ETFs to provide short exposure to broad U.S. market indices.

What type of securities does the TFJL ETF hold in its portfolio?

The TFJL ETF typically invests in equity securities of companies included in the S&P 100® Index and certain smaller capitalized stocks diversified across major economic sectors, often found within the S&P 500® Index.

How does the TFJL ETF manage risk and volatility?

The TFJL ETF aims to manage risk and reduce volatility by utilizing market indicators to determine when the U.S. equity market is unfavorable. During such periods, the fund may allocate assets to cash, cash equivalents, short-term fixed income ETFs, and even inverse ETFs to protect against market downturns.

Who is the Sub-Advisor responsible for managing the TFJL ETF?

The TFJL ETF is managed by EquityCompass Investment Management, LLC (the "Sub-Advisor"), which plays a crucial role in analyzing market indicators and making allocation decisions for the fund.

6 min read

By Ron Koren, ETF Insider

What is the TFJL ETF ?

In the ever-evolving landscape of financial instruments, Exchange-Traded Funds (ETFs) have garnered significant attention from investors seeking diversified exposure to various asset classes. Among the plethora of ETFs available, the TFJL ETF (hereafter referred to as "the Fund") stands out as a unique and innovative investment product. This article aims to provide a comprehensive overview of the TFJL ETF, shedding light on its underlying strategy, benefits, considerations, and potential outcomes for investors.

TFJL ETF: Overview

The TFJL ETF, an acronym for the unique title of the fund, is an investment vehicle that utilizes Flexible Exchange® Options (FLEX Options) referencing the iShares 20+ Year Treasury Bond ETF (the "Underlying ETF"). The Fund's primary objective is to generate returns that match the performance of the Underlying ETF, with specific caps on potential upside returns and floors to limit downside losses.

TFJL ETF: Underlying and Exposure: What Does It Track and How?

The Fund's strategy revolves around FLEX Options, which are exchange-traded options contracts with customizable terms. FLEX Options are linked to the performance of the Underlying ETF, an exchange-traded fund designed to track the investment results of an index composed of U.S. Treasury bonds with maturities greater than 20 years. This underlying exposure to long-term U.S. Treasury bonds provides investors with a unique investment proposition, combining the potential for income and capital appreciation. The Fund achieves its targeted outcomes by strategically purchasing and selling call and put FLEX Options to create layers within its portfolio. The strike prices of these FLEX Options are carefully selected at the commencement of each Outcome Period, which spans three months. The Fund seeks to achieve returns that closely mirror the performance of the Underlying ETF, up to a predetermined cap, while mitigating downside losses with a specified floor.

TFJL overlap What is the TFJL ETF ?

TFJL ETF: Benefits to Invest in This ETF

The TFJL ETF offers several compelling benefits that may attract investors seeking a combination of potential returns and risk management:
Customizable Exposure: The FLEX Options used in the Fund's strategy allow for tailored exposure to the Underlying ETF, providing investors with unique investment outcomes.
Limited Downside Risk: The Fund's floor mechanism seeks to limit losses to 5% if the Underlying ETF experiences a decline greater than 5% over the Outcome Period.
Diversification Potential: The Underlying ETF's focus on long-term U.S. Treasury bonds can serve as a diversification tool in a portfolio, particularly during periods of economic uncertainty.
Attractive Returns: For investors who continuously hold Fund Shares from the beginning to the end of an Outcome Period, the Fund aims to provide returns that match the performance of the Underlying ETF, up to the predetermined cap.

TFJL ETF: Considerations Before Investing

While the TFJL ETF offers unique benefits, potential investors must carefully consider certain factors before making an investment decision:
Cap Limitation: The Fund's capped potential upside returns mean that investors will not participate in excess returns if the Underlying ETF's share price experiences returns exceeding the cap.
Floor Activation: The floor mechanism only comes into effect if the Underlying ETF's share price experiences a decrease of more than 5% over the Outcome Period. Before the floor activates, investors may be vulnerable to losses.
NAV vs. Underlying ETF Returns: Due to the mechanics of the Fund's strategy, the Fund's Net Asset Value (NAV) may not directly correlate on a day-to-day basis with the returns experienced by the Underlying ETF.
Non-Diversified Classification: The Fund is classified as "non-diversified" under the Investment Company Act of 1940, which means it may invest a significant portion of its assets in a limited number of issuers.

Conclusion

The TFJL ETF represents an innovative financial instrument that utilizes FLEX Options to create a distinct investment strategy based on the performance of the iShares 20+ Year Treasury Bond ETF. The Fund offers investors a unique blend of potential returns and risk management, making it an intriguing option for those seeking exposure to long-term U.S. Treasury bonds. However, investors should thoroughly analyze the Fund's strategy and consider their risk tolerance and investment objectives before making any decisions.

TFJL ETF issuer
TFJL ETF official page

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FAQ

What is the TFJL ETF?
The TFJL ETF, also known as the EquityCompass Tactical Risk Manager ETF, is an exchange-traded fund that primarily invests in equity securities of companies domiciled in the United States or listed on a U.S. securities exchange.
How does the TFJL ETF aim to achieve its investment objectives?
The TFJL ETF seeks to achieve its investment objectives by analyzing technical and fundamental market indicators to determine the current overall favorability of the market. During periods when the U.S. equity market is unfavorable, the fund may invest all or a portion of its assets in cash, cash equivalents, short-term fixed income ETFs, or even inverse ETFs to provide short exposure to broad U.S. market indices.
What type of securities does the TFJL ETF hold in its portfolio?
The TFJL ETF typically invests in equity securities of companies included in the S&P 100® Index and certain smaller capitalized stocks diversified across major economic sectors, often found within the S&P 500® Index.
How does the TFJL ETF manage risk and volatility?
The TFJL ETF aims to manage risk and reduce volatility by utilizing market indicators to determine when the U.S. equity market is unfavorable. During such periods, the fund may allocate assets to cash, cash equivalents, short-term fixed income ETFs, and even inverse ETFs to protect against market downturns.
Who is the Sub-Advisor responsible for managing the TFJL ETF?
The TFJL ETF is managed by EquityCompass Investment Management, LLC (the "Sub-Advisor"), which plays a crucial role in analyzing market indicators and making allocation decisions for the fund.

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