Defined outcome ETFs have exploded in popularity, offering investors a way to combine downside protection with upside participation. In this episode of Excess Returns, we sit down with Jeff Chang of Vest Financial to break down the mechanics of buffer ETFs, how they fit into portfolios, the critiques they face, and where this space is headed. Jeff shares the origin story of Vest, the innovations that made these strategies accessible and how Buffer ETFs work behind the scenes.

• The origin of Vest and the impact of the Lehman collapse on product design

• How buffer ETFs work and why they focus on the “first 10–15%” of drawdowns

• The behavioral finance angle: making hedging simple and accessible

• Why 2022 highlighted the weaknesses of traditional 60/40 portfolios

• The mechanics of buffer ETFs: options structures and resets

• Popular buffer levels and how investors are using them

• Addressing critiques: costs, beta instability, and comparisons to cash or commodities

• The scalability of these strategies and potential market impact

• Behavioral vs. quantitative advantages of defined outcome funds

• Future developments, including applications to crypto and higher-volatility assets

• Jeff’s lessons on investing, risk management, and staying invested

• 00:00 – Introduction and the growth of defined outcome strategies

• 02:00 – The genesis of Vest Financial after Lehman’s collapse

• 09:00 – Explaining buffer ETFs in simple terms

• 14:00 – Who uses these strategies and why 2022 was a turning point

• 18:00 – Mechanics of resets and protection at market highs

• 22:00 – Range of buffers, caps, and investor demand

• 27:00 – The options structures behind buffer ETFs

• 30:00 – Liquidity, scalability, and market impact considerations

• 34:00 – How investors are using buffers in portfolios

• 38:00 – Tax efficiency inside the ETF wrapper

• 39:00 – Addressing critiques: cash, commodities, and costs

• 47:00 – Are these strategies more behavioral or quantitative?

• 48:30 – The future of buffer strategies and expansion into crypto

• 53:00 – Jeff’s contrarian investing belief

• 54:00 – The one lesson Jeff would teach every investor