Goldman Sachs and Morgan Stanley met on February 13, 2025 on the New York Stock Exchange.
Danielle Devries | CNBC
Goldman Sachs Asset Management threw its hat into the increasingly popular ring of buffering exchange-traded funds, just as the stock market showed some signs of fragility.
On Tuesday, the company announced the launch of Goldman Sachs US Large Cap Buffer 3 ETF (GBXC). These are two similar funds launched in recent months. Each fund is reset quarterly, meaning investors now have a new version to choose from each month.
GSAM Buffer ETF
| fund | stock | Launch the moon |
|---|---|---|
| GS Our Big Hat Buffer 1 ETF | Grant | January |
| GS Our Big Hat Buffer 2 ETF | GBXB | February |
| GS Our Big Hat Buffer 3 ETF | GBXC | Moving |
source: Goldman Sachs Asset Management
Buffer funds fall into the category called the definitive result product, attracting billions of dollars in investors in recent years. Buffer funds typically use derivatives in the form of stock-linked notes to protect some potential upside-down protections on the market.
There are a variety of buffer funds on the market, with various protections and upside participation. For the new Goldman Sachs fund, they will prevent 5% to 15% losses on the market, represented by the base SPDR Portfolio S&P 500 ETF (SPLG). In exchange, the upper limit of these funds is between 5% and 7%.
Brendan McCarthy, head of global distribution at Goldman Sachs Asset Management ETF distribution, said the company believes the 5% to 15% range is the “best position.”
“The feedback we get from customers is that I’m in the market. I can tolerate a few percentage points. It’s like I expected. When I fall 5 to 15, it gets painful.”
The two main differences with other buffer funds are that most competitors reset most of the competitors each year rather than quarterly resets, while Goldman Sachs also has an additional floor built in. In addition to 5%-15% protection bands, these funds have additional buffers when it will reduce the total loss in the market and limit the total loss of about 25%, limiting it to about 15%.
How funds work
The buffer fund is designed to purchase or very close to the reset date throughout the period. Based on how option pricing changes over time, the price of the fund may be higher than the price indicated by the buffer.
“You can show losses in your position, but as long as you stick to the next reset, you get published parameters,” said Stuart Chaussee, a registered investment advisor based in Beverly Hills, California.
Although funds are designed for each outcome period, if investors hold investors through multiple resets, their impact will intensify over time. For example, if the market drops sharply by a quarter but the next rally, the rally in the buffer fund will come from a higher starting point.
“These are basically to help you reduce deeper help to help you recover faster,” said Oliver Bunn, portfolio manager and global leader of the Quantitative Investment Strategy Alternatives Team at Goldman Sachs Asset Management.
Of course, the same is true in the opposite case. If the market steadily climbs and exceeds the upper limit, the performance of the buffer fund will be affected over time.
Some of the other biggest players in the buffer fund space are the innovators, First Trust and Allianz. New Goldman Sachs The expense of funds is 0.50%, which is cheaper than many of the largest buffer funds on the market.
Market environment
ETF releases are usually a month-long process, and it is difficult to time them to certain market periods. Nevertheless, Goldman Sachs Fund may adopt early at the right time.
Monday, S&P 500 It fell 1.76%, the worst meeting since December. The index is now 4.84% below its record high.
The S&P 500 starts to be tough in 2025.
Chaussee said clients often come to him for buffering funds when asking about volatility.
“All the uncertainty we have now and the fact that stocks trade in sublime multiples, this is a time when you’re likely to get some protection,” Chaussee said.
