Episode summary
Inside Aptus’s Launch of the Lowest-Cost Buffer ETFs
ETF Prime
· · Hosts: Nate Geraci, Simeon Hyman · Guests: JD Gardner, Stacey Morris
Summary
The episode opens with a look at energy ETFs and the sector’s mixed year: XLE is up about 7% year to date, but oil is down almost 20% and the broader market has pulled ahead. Stacey Morris says energy has recently held up better because it is less exposed to worries about AI bubbles, high tech valuations, and falling interest rates, while refining has been a bright spot thanks to lower crude costs and tight global supply. She also notes that valuations are cheap versus the market, with energy screens showing a 5.3% trailing free cash flow yield versus 2.8% for the S&P 500.
Key takeaways
- Stacey Morris said energy is cheap relative to the market, with a 5.3% trailing free cash flow yield versus 2.8% for the S&P 500.
- Morris said refiners have benefited from lower crude prices and global outages, making crack spreads and refining margins a sector bright spot.
- Morris said nuclear has strong tailwinds from AI data centers, energy security, policy support, and utility exposure in the NUKZ index.
- JD Gardner said Aptus launched its buffer ETFs at 25 basis points because it believes similar structures do not need 70 to 90 basis points in fees.
- Gardner argued buffer ETFs can help investors take more equity risk with more comfort, potentially improving long-term compounding if they stick with the strategy.
- Gardner said Aptus sees ACIO as a more effective buffer-like strategy than traditional buffers because it manages options daily and seeks a higher ceiling.
Notable quotes
“the energy sector is still less than 3% of the waiting in the S&P 500, which almost seems hard to believe”
“energy has the second highest trailing 12-month free cash flow yield of any S&P sector at 5.3%”
“I feel really good about MLPS continuing to grow their distributions and grow their payouts”
“What that means is if the market's down 20 and you have a 15% buffer, you should be down roughly five”
How the episode opens
I feel really good about MLPS continuing to grow their distributions and grow their payouts. And so, not only do MLPS have, you know, higher yield than Broader Energy, they have a higher free cash flow yield.
All right, joining me will be JD Gardner, founder of Aptis Capital Advisors, who back in October, they rolled out a series of buffer ETFs, defined outcome ETFs, which I would say these ETFs are pretty straightforward. They offer a 15% downside buffer and then there's the usual upside cap. But the kicker here is that the expense ratio on these is only 25 basis points.
25 basis points, which makes them the lowest cost buffer ETFs on the market. Now, I should note there are some buffer fund of funds ETFs, which are cheaper, but if you add up the total expense ratios with all the underlying holdings, they're much higher altogether. It's not even close.
And so I'll tell you, I found APTUS launching these ETFs very interesting for two primary reasons. Number one, buffer ETFs have generated a lot of debate. And I think one of the key areas naysayers have pointed to are the fees on these products because it's not unusual to see expense ratios of 70, 80, 90 basis points.
The other reason I found this interesting is because you don't typically see a smaller issuer undercutting the larger issuers on fees, right? It's usually the other way around. Now, uh to be clear, Aptis isn't some little upstart issuer.
This is a $6 billion firm and actually one of my favorite ETF success stories, but they're certainly not as big as many of the players competing in the buffer ETF space. And so JD and I uh will discuss why Aptis did decide to get involved here.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- buffer etfs
- low-cost etfs
- investor behavior
- energy etfs
- energy sector outlook
Companies and tickers mentioned
- Aptus Capital Advisors
- VettaFi
Watch the episode
Watch “Inside Aptus’s Launch of the Lowest-Cost Buffer ETFs” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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ETF Prime, this episode and its artwork belong to Nate Geraci. Octagon is not affiliated with the show; this page is an independent summary.
