The downside-protected portfolio lets you capture the upside potential of the S&P 500 while protecting against downside losses (in USD). The portfolio is constructed with a series of innovative ETFs, which make use of options strategies to provide a high level of protection against downside losses.

As the S&P 500 goes down, the losses of the portfolio will be limited to approximately the “est. max loss” level. This keeps you shielded from major losses even as the market falls. To keep the cost of this protection low, we introduce a "current upside cap" on returns. This means that as the S&P 500 trends higher, the portfolio returns will initially be limited to the cap level. To help you get the most out of your investment, we periodically revise the cap level upwards to lock in gains and keep the upside growing.

Imagine a Downside Protected Portfolio with an est. max loss of 5% and a current upside cap of 12%. Here are three hypothetical scenarios of how this portfolio may perform:
- In a challenging market, say the S&P 500 drops by 20%. The portfolio would typically incur a loss of around 5%, protecting your investment from further declines.
- In a positive market, say the S&P 500 gains 10%, which is within the upside cap of 12%. Your portfolio would potentially be up by 5%, and moving towards the upside gains in the index.
- In a booming market, say the S&P 500 soars above 20%. Your portfolio would likely achieve the upside cap of 12% (subject to periodic re-optimisation).

The est. max loss and current upside caps could be reset for 2 reasons: (1) as initiated by Syfe (subject to your consent) and (2) when existing options within the constituent ETFs expire and subsequently get rolled over to new options. These re-optimisation features make the downside-protected portfolio an evergreen alternate portfolio for you to invest in. 

1. Syfe initiated
‍Syfe offers periodic re-optimisation usually on a semi-annual basis. This allows the portfolio to lock in the gains while continuing to capture further upside potential. This is achieved by replacing the existing constituent ETFs with new ETFs offering a higher return cap and loss protection closer to prevailing market conditions. Essentially, as the portfolio’s gains move closer to the current upside cap, we re-optimise the portfolio to these new ETFs which effectively helps to reduce loss potential and revise the current upside cap upwards to capture further growth. 

‍2. Roll of options within the ETFs
‍In addition, options embedded within the constituent ETFs will also roll over on an annual or biennial basis upon expiry. The newly rolled-over options will continue to protect against losses as the downside (put) option restrikes to the prevailing ETFs’ prices while the upside (call) option provides a new higher upside cap. This helps to keep the est. max loss unchanged (before fees) and revise the upside cap higher.

Refer to our Investment Strategy to learn more.

The estimated max loss figure will vary depending on the time you invest in the portfolio, and will be fixed after your funds are invested. Though not guaranteed, the portfolio losses are expected to remain within the est. max loss level. While unlikely, the portfolio may sometimes sustain a loss greater than the est. max loss level during large market downturns.

A downside-protected portfolio lets you participate in the upside potential of the S&P 500 while protecting against downside losses. To reduce the cost of downside protection (“est. max loss”), the strategy sets a "current upside cap" on returns. This means that as the S&P 500 trends higher, the portfolio returns will sacrifice some of the upside, subject to periodic re-optimisation. The downside protection and the cap on upside keep the protected portfolio less volatile compared to the S&P 500, and helps shield against major market downturns.

When should you consider a protected portfolio?

1. Risk-averse - if you are generally risk-averse and prefer to minimise your potential losses while still capturing some upside potential, a downside-protected portfolio is ideal. 

2. Waiting for opportunities - for those who have been on the sidelines and are currently holding excess cash, this portfolio offers an excellent solution. Transitioning to a downside-protected portfolio lets you enter the equity markets with greater confidence. 

3. Currently invested in US equities - if you are currently invested in the US markets but are unsure about the market’s direction, you can consider switching to a downside-protected portfolio in the meantime, instead of exiting the market completely.