This is a defined-outcome ETF that provides exposure to a U.S. equity index while using options to protect against a set range of losses. Over a one-year outcome period, it cushions a certain amount of downside in exchange for a cap on upside returns, and the structure is reset every June.

It suits moderate-risk investors who want to invest in U.S. equities, are willing to accept an upside cap, and want protection against a certain range of losses.

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

The fund provides exposure to a U.S. equity index and uses an options structure to cushion a set range of losses over the one-year outcome period, in return for a cap on upside returns. A new buffer and cap are set every June, and buying partway through the outcome period can change the protection and cap that apply.

• Structure that cushions a set range of losses
• Defined-outcome design with an upside cap

Assets under management (AUM) are $502.8M, 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 cap level, and the outcome period.

Buffer strategies tend to lag the underlying index in rising markets because of the cap, while in falling markets they cushion a certain range of losses and reduce the drawdown. The protection and cap that actually apply depend on whether you enter partway through the outcome period.

Defined-outcome products tend to attract inflows from investors seeking downside protection when market uncertainty rises, and money sometimes shifts into this product category when interest in volatility management increases. It is also worth noting that performance varies with market conditions and the outcome period.

The defined downside cushion is its strength, while the upside cap, dependence on the outcome period, and changed terms for mid-period entry are the considerations.

For investing in U.S. equities directly without protection, direct substitutes 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. For a buffer product with a different start month, you can also consider products such as GFEB. 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 defined-outcome buffer structure based on a June start.

Here are the points to check before investing in GJUN. The downside cushion is attractive, but the upside cap, dependence on the outcome period, and limits of the buffer need to be confirmed in advance. It is best to approach the fund only after fully understanding the defined-outcome structure.

The cap in strong bull markets 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 sufficient understanding of the defined-outcome structure, you may get results that differ from your expectations.

It is a suitable candidate for moderate-risk investors who want to invest in U.S. equities while being protected against a certain range of losses. If you want to invest without protection, consider products such as SPY and VOO. If you want a defined-outcome buffer structure, it is advisable to choose this product after understanding how the structure works.