Innovator ETFs has listed the Innovator International Developed Power Buffer ETF – December (IDEC ) as part of its lineup of "Defined Outcome ETFs":https://www.innovatoretfs.com/define/etfs/.
IDEC seeks to track the return of the iShares MSCI EAFE ETF (EFA ), up to a predetermined cap. It does this while buffering investors against the first 15% of losses over the outcome period. Since the ETF resets at the end of each outcome period approximately annually, investors can hold IDEC indefinitely.
See more: Innovator Lists November Buffer ETF
The outcomes that IDEC seeks to provide may only be realized if investors are holding shares on the first day of the outcome period and continue to hold them on the last day of the outcome period, approximately one year. There is no guarantee that the outcomes for an outcome period will be realized.
IDEC charges 85 basis points.
Providing Defined Outcomes in an ETF
Innovator Defined Outcome ETFs are designed to take advantage of market growth while maintaining defined levels of buffers against loss. They are as tax efficient as traditional ETFs due to a recent rule change allowing the in-kind trading of options.
Innovator launched in November the Innovator International Developed Power Buffer ETF – November (INOV ). In March, Innovator announced the listing of four income-focused Defined Outcome ETFs. The Innovator Premium Income Barrier ETFs to offer fixed rates of high income with protective barriers against decline in the S&P 500 over a one-year period.
“Many advisors have been successfully using buffer ETFs to limit the downside,” said VettaFi’s Head of Research Todd Rosenbluth. “But these new ETFs will provide an income alternative to bond ETFs without credit or duration risk.”
Innovator ETFs’ head of distribution Trevor Terrell said at Exchange 2023 that the way the firm manages risk is by offering solutions “only available in insurance wrappers or in bank products” through the ETF vehicle.
“We provide defined outcomes in an ETF,” Terrell said. “You get market exposure with built-in risk management.”
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