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Market Update

Why Buffer Funds Aren’t a Perfect Fix

Despite their complexity, buffer funds have generally performed according to plan.

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Buffer funds--which promise to limit downside losses from equity-market exposure while capping upside returns--have grown increasingly popular. By my count, there are now roughly 80 exchange-traded funds plus a handful of open-end mutual funds following this approach. [1] Since the first buffer products appeared on the scene in 2016, assets have grown to more than $5.2 billion.

Amy C. Arnott does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.