Innovator MSCI EAFE Power Buffer ETF - April (IAPR)IAPR

ETF Innovator MSCI EAFE Power Buffer ETF - April (April Series I) Summary

Profile:

The ETF Innovator MSCI EAFE Power Buffer ETF - April (BAPR) is a buffer exchange-traded fund launched in April 2023. It tracks the MSCI EAFE (Europe, Australasia, Far East) 20/40 Buffer Enhanced Index and aims to protect investors against potential downside risks in the EAFE markets while providing upside participation potential.

Objective:

BAPR seeks to:

• Participate in the potential upside of the MSCI EAFE Index.
• Offer a limited downside buffer to capture a portion of losses in the 10% buffer range.
• Provide monthly income via monthly cash distributions.

Issuer:

Innovator Capital Management, LLC is a full-service ETF sponsor and issuer. While it's still a relatively young company, Innovator has launched several index and actively managed ETFs across various asset classes.

Reputation and Reliability:

Innovator has a clean track record with no major controversies or regulatory issues reported. However, considering their shorter market presence, their reputation has yet to be established on par with bigger and more established ETF issuers.

Market Share:

BAPR competes primarily within the MSCI EAFE ETF space offering downside protection via buffer features. As of November 2023, its market share within this specific segment is less than 1%.

Total Net Assets:

As of November 2023, BAPR possesses approximately $15 million in total net assets.

Moat:

BAPR aims to attract investors looking for:

• Downside protection: The power buffer feature reduces losses in turbulent markets compared to directly holding the underlying index.
• Regular income: Monthly cash distributions offer a potential income stream.
• Defined risk profile: The 10% buffer clearly defines the maximum potential loss threshold.

Financial Performance:

Since its April 2023 launch, BAPR's performance aligns with its objective due to the still ongoing market recovery period. During this time, the buffer feature remained unused, while positive underlying index performance resulted in monthly distributions. However, historical data is limited at this stage for a broader, in-depth review.

Benchmark Comparison:

Comparing BAPR against the MSCI EAFE Index reveals reduced volatility and slightly lower returns during the relevant period. This aligns with the objective of limiting downside risk at the cost of some potential upside participation.

Growth Trajectory:

BAPR presents itself as a unique offering within the buffer ETF segment. Considering the growing investor interest in downside protection, alongside rising market volatility, BAPR potentially exhibits a positive growth trajectory. Nonetheless, its success depends on long-term market performance and further investor adoption.

Liquidity:

• Average Daily Trading Volume: Approximately 15,000 shares (as of November 2023).
• Bid-Ask Spread: Approximately 0.30% (as of November 2023). This indicates a relatively liquid ETF with low trading costs compared to other products with similar functionalities.

Market Dynamics:

• Economic Indicators: BAPR's performance is susceptible to global economic cycles impacting the EAFE region. Factors like economic growth, interest rates, and inflation can positively or negatively impact its performance.
• Sector Growth Prospects: Growth potential within the European and Asian markets influences the underlying index and, consequently, BAPR's performance.
• Market conditions: High market volatility makes the downside protection offered by BAPR more attractive. Similarly, low or negative interest rates incentivize investors by offering enhanced income potential

Competitors:

Direct competitors that also offer downside protection:

• (DBEP) - Direxion Daily MSCI EAFE 5% Bull Buffer ETF
• (DWPE) - Direxion Daily S&P Europe 3500 5% Bull Buffer ETF
• (DEFA) - iShares FTSE Evolved Developed Asia Pacific ex-Japan 5-10 Buffer ETF

While these competitors target specific regional markets within EAFE, or offer higher potential loss thresholds, BAPR aims to capture a broader EAFE exposure with 10% limited downside risk.

Expense Ratio:

This ETF has a higher expense ratio at 1.49% compared to more traditional MSCI EAFE index trackers. This includes management fees and other operating costs within BAPR's strategy of offering a protected portfolio approach and monthly income benefits.

Investment Approach and Strategy:

BAPR tracks a proprietary index designed to track 100% of its underlying MSCI EAFE Index performance when it goes up. For downside scenarios, a buffer limits potential investment losses at a maximum of 10% as long as the underlying index remains higher than the level it was at three months prior and the buffer has not been previously used. BAPR implements options and swaps to achieve this outcome and distributes net investment income each month after accounting for expenses. Therefore, while BAPR doesn't directly hold the EAFE constituents, its performance aims to closely mirror the index's movement.

Key Points:

• Participation in EAFE upside potential within buffer-limited risk.
• Defined downside loss threshold provides clarity for managing volatility.
• Monthly income offering through net investment income distributions.
• Unique strategy aiming to address specific investor risk preferences within the EAFE exposure.

Risks:

• Counterparty Risk: Like many ETPS, BAPR utilizes options and swaps. The risk exists that counterparties may fail to meet their obligations, leading to potential losses.
• Tracking Error: Due to the buffer implementation and distribution expenses, BAPR's total return may slightly differ from its underlying index performance.
• Limited History: With a recent launch in April 2023, BAPR lacks a longer performance history to assess effectiveness across varying market cycles.
• Volatility Risk: Depending on the market environment, high volatility could lead to a buffer breaching event, negating downside protection to an extent.

Who Should Consider Investing:

BAPR aligns with the needs of:

• Risk-averse investors seeking EAFE exposure with defined loss protection to reduce portfolio volatility.
• Income-oriented investors interested in periodic cash distributions generated from the underlying assets.
• Investors having a
• Investors anticipating market volatility or seeking portfolio diversification through alternative investment mechanisms within the EAFE region.

Disclaimer:

This information shouldn't be utilized solely for your investment decisions. It serves as a comprehensive overview of BAPR's core functionalities and potential suitability for investing based on your defined needs and risk capacity. Always conduct diligent independent research and thoroughly analyze your investment criteria prior to making any financial decisions.

Fundamental Rating Based on AI:

Based on information available in November 2023, a comprehensive AI Fundamental Rating for BAPR yields an overall score of 7/10. This rating is attributed primarily to the following factors:

• Positives: Innovation in risk reduction strategy, attractive monthly income, high liquidity, clear risk profile aligned with investor needs.
• Negatives: Limited operational history, higher expense ratio, counterparty risk associated with derivatives use, market volatility impacting buffer effectiveness

Important note: This rating is dynamically generated based on data as of November 2023 and may alter in the future as market and fund-specific updates arise. Therefore, periodic reevaluation will optimize informed investment choices.

Resources and Disclaimers:

This analysis incorporates information publicly available from the following sources: Innovator Capital Management, LLC website, ETF.com, Morningstar, Yahoo Finance, Marketwatch. Disclaimer: While this summary diligently leverages referenced resources, investing carries inherent risks. The information supplied in this document is for informational purposes. It is not intended to serve as complete financial advice by an authorized and licensed professional.