‘Buffer’ ETFs Prove a Decent Bond Alternative in War-Hit Markets

Bonds keep failing at one of their key jobs — cushioning stock losses. Wall Street has noticed, and it’s pushing an alternative: an $80 billion category of equity funds designed to provide the downside protection Treasuries may no longer reliably deliver.

Defined-outcome exchange traded funds, or buffers, use options to cap stock losses in exchange for limiting gains, a trade-off that’s pulled in advisers and endowments. So far, they’ve performed as advertised since the Iran war started: The $8.6 billion FT Vest Laddered Buffer ETF, the largest of the funds, is down 1.4% in March, compared to a 2.7% slide in the S&P 500 Index. Ten-year Treasury yields have climbed around 30 basis points over that span.