This is a defined-outcome ETF that gives exposure to a US equity index while using options to protect against deeper-tier declines. Over the one-year outcome period, it cushions a wider range of losses than a standard buffer, in exchange for a lower upside cap, and the structure is reset every September.

It suits conservative investors who want US equity exposure and are willing to accept a lower upside cap in return for protection against deeper-tier declines.

It is a passive (index-tracking) ETF managed by First Trust.

The fund gives exposure to a US equity index and uses an options structure to cushion deeper-tier declines than a standard buffer over the one-year outcome period. In return, it places a lower cap on upside gains. A new buffer and cap are set every September, and buying partway through the outcome period can change the protection and cap that apply.

• A structure that cushions deeper-tier declines
• A defined-outcome design with a lower upside cap

Assets under management (AUM) stand at $433.4M, and the total expense ratio is 0.85% per year.

Compared with other buffer and defined-outcome ETFs such as BUFR and BUFD, the main points of comparison are the width of protection, the level of the cap, and the outcome period.

Deep buffer strategies tend to lag the underlying index in rising markets because of the lower cap, while in falling markets they cushion a wider range of losses and sharply reduce drawdowns. The protection and cap that actually apply depend on whether an investor enters partway through the outcome period.

Defined-outcome products tend to attract inflows as demand for downside protection grows when market uncertainty rises, and money sometimes moves into this product group when demand for greater protection increases. It is also worth noting that performance varies with market conditions and the outcome period.

Deeper downside cushioning is its strength, while the lower upside cap, dependence on the outcome period, and changed terms for mid-period entry are factors to consider.

For direct exposure to US equities without protection, alternatives include SPY and VOO, which track the S&P 500. For a laddered buffer that spreads exposure across several outcome periods, products such as BUFR are also worth comparing. Buffer products with a different start month, such as GFEB, can also be considered. The three products shown in the table, BUFR, BUFD, and PJAN, differ in protection width and structure: a laddered buffer, a deep buffer, and a buffer with a different start month, respectively. What sets this ETF apart is its deeper buffer structure based on a September start.

Here are the points to review before investing in DSEP. The deeper downside cushion is attractive, but the lower upside cap, dependence on the outcome period, and the limits of the cushion should be checked in advance. It is best to approach the product only after fully understanding the defined-outcome structure.

The lower upside cap and large declines that exceed the buffer are the main variables for performance, and buying partway through the outcome period changes the protection and cap that apply. Without a thorough understanding of the defined-outcome structure, investors may get results that differ from their expectations.

It is a suitable candidate for conservative investors who want US equity exposure with protection against deeper-tier declines. For investing without protection, products such as SPY and VOO fit better, and for a deeper buffer structure, it is advisable to choose this product after understanding how it works.