Searching for alpha without the extra risk?
The Target Growth Strategy seeks to enhance equity returns—with built-in clarity and one-to-one downside tracking
Why Target Growth?
- Seeks to unlock engineered outperformance potential in traditional equity markets
- Designed to generate additional upside potential through performance multipliers
- Systematic, rules-based process—no guesswork when it comes to stock picking
- Tracks market downturns one-to-one—no enhanced relative downside risk
- Transparent structure: know the index, the upside multiplier, deductible and how it works
Why invest in the Target Growth Strategy?
Many investors rely on equities to fuel long-term growth, increase purchasing power, and meet their financial goals. To access equity exposure, they face a wide range of options—passive indexing, factor-based strategies, fundamental active management, and more.
The Target Growth Strategy seeks to offer something different: a precision-engineered approach that applies a clearly defined, pre-determined multiplier to equity index returns. It is designed to give investors full transparency—knowing exactly which index they’re looking to track and the targeted upside performance multiplier.
The return mechanism follows a rules-based process implemented across all Target Growth Strategies. This seeks to remove the guesswork inherent to traditional active management.
Performance doesn’t rely on choosing the right stocks, sectors, or factors to beat a benchmark. Instead, it follows a systematic approach that is intended to address the persistent challenge of traditional active managers underperforming the benchmark over time.
In addition to upside potential, we recognize investors want to manage risk—especially during downturns. Unlike traditional active or leveraged strategies, the Target Growth Strategy is designed to track downside one-to-one. This gives investors the opportunity to capture more upside potential in rising markets, without taking on more risk when markets fall.
How It Works
The strategy has four key elements:
Reference Asset
An ETF such as the SPDR® S&P 500 ETF Trust (SPY).
Accelerated Alpha
If the reference asset experiences positive returns over the outcome period, the strategy is designed to enhance gains compared to the reference asset by a predetermined performance multiplier, after a specified deductible.
Outcome Period
A term, such as a 1-year period, for which gains or losses are calculated.
Maintain Downside Control
If the reference asset experiences negative returns over the outcome period, the strategy is designed to seek losses that track the reference asset one-to-one to avoid additional downside risk.
Where It Can Fit in the Portfolio
Passive index funds are often used to build core portfolio exposure—but they come with a tradeoff: little or no alpha potential.
Target Growth Strategies are designed to outperform passive indexing strategies in strong upward markets by adding a multiplier to the index returns. This gives investors the potential for additional upside.
Traditional active equity strategies often promise alpha but struggle to deliver consistent results.
Target Growth seeks to offer an alternative—allowing investors to pursue outperformance potential through a clearly defined, systematic structure, rather than relying on stock selection or timing.
How To Invest
Target Growth Strategies are available through First Trust.
View Funds on First Trust WebsiteAdditional Resources
ArticleThe numbers don't lie: Vest’s $50 billion in defined outcome strategies is proof that sophisticated derivatives are now accessible across a wide range of portfolios. This milestone proves that the fundamental shift in investing has already begun.
ArticleDiscover why traditional benchmarks fail for buffer strategies—and how to better measure engineered outcome-based investments. Learn more at Vest.
For Financial Professionals OnlylockEducational PaperA modern growth strategy for advisors seeking uncapped upside—with defined risk. Learn how the Uncapped Accelerator fits within Target Outcome Strategies®.
