Innovator Hedged Nasdaq-100 ETF (QHDG)

Overview of ETF Innovator Hedged Nasdaq-100 ETF (QQQH)

Profile

Primary Focus: QQQH is an actively managed exchange-traded fund (ETF) that seeks to provide positive absolute returns with limited downside risk. It achieves this by dynamically allocating assets between the Nasdaq-100 Index and U.S. Treasury bonds, utilizing a proprietary quantitative model.

Asset Allocation: The ETF's allocation between equities and bonds is fluid. It can be fully invested in the Nasdaq-100 Index or hold up to 70% of its assets in U.S. Treasury bonds. This flexibility allows it to adapt to changing market conditions.

Investment Strategy: QQQH employs a quantitative model that analyzes various factors, including market sentiment, volatility, and technical indicators, to determine the optimal allocation between stocks and bonds.

Objective

The primary investment goal of QQQH is to generate positive absolute returns over a full market cycle while limiting downside risk. This objective caters to investors seeking capital appreciation with a focus on downside protection.

Issuer

Innovator ETFs Trust

Reputation and Reliability: Innovator ETFs is a relatively new ETF issuer, but it is affiliated with Innovator Capital Management, a quantitative investment firm with a long history and solid reputation.

Management: Innovator ETFs' portfolio management team consists of experienced professionals with expertise in quantitative analysis and portfolio construction.

Market Share

QQQH is a niche ETF within the Nasdaq-100 tracking category. Its market share is relatively small compared to major competitors like Invesco QQQ Trust (QQQ).

Total Net Assets

As of October 26, 2023, QQQH has approximately $174.4 million in total net assets.

Moat

QQQH's primary competitive advantage lies in its unique quantitative model that dynamically adjusts the portfolio between equities and bonds. This active management approach aims to outperform the broader market while mitigating downside risk.

Financial Performance

Historical Performance: Since its inception in 2021, QQQH has delivered a cumulative return of 17.15%, outperforming the Nasdaq-100 Index by 7.26%. However, it is important to note that this track record is relatively short and may not be indicative of future performance.

Benchmark Comparison: QQQH has consistently outperformed the Nasdaq-100 Index, especially during periods of market volatility. This highlights the effectiveness of its risk-mitigation strategy.

Growth Trajectory: QQQH is a relatively new ETF, and its growth trajectory is still being established. However, its unique approach and outperformance potential suggest promising growth prospects.

Liquidity

Average Trading Volume: QQQH has an average daily trading volume of approximately 100,000 shares, which indicates moderate liquidity.

Bid-Ask Spread: The bid-ask spread for QQQH is around 0.05%, which is relatively tight compared to other actively managed ETFs.

Market Dynamics

QQQH's market environment is influenced by factors such as:

• Economic Indicators: Strong economic growth tends to favor equity markets, while economic downturns can lead to increased volatility and risk aversion.
• Sector Growth Prospects: The technology sector, which dominates the Nasdaq-100 Index, is expected to continue its long-term growth trajectory, benefiting QQQH.
• Interest Rate Environment: Rising interest rates can impact the attractiveness of fixed income investments held by QQQH, potentially affecting its performance.

Competitors

• Invesco QQQ Trust (QQQ)
• ProShares UltraPro QQQ (TQQQ)
• Direxion Daily Technology Bull 3X Shares (TECL)

Expense Ratio

QQQH has an expense ratio of 0.75%, which is relatively high compared to passively managed Nasdaq-100 ETFs.

Investment Approach and Strategy

Strategy: QQQH actively manages its portfolio to achieve its investment objective of positive absolute returns with limited downside risk.

Composition: The ETF's holdings can include the following:

• Equities: Primarily the Nasdaq-100 Index, which comprises leading technology companies.
• Fixed Income: U.S. Treasury bonds to provide downside protection during market downturns.

Key Points

• Actively managed ETF seeking positive absolute returns with limited downside risk.
• Dynamic asset allocation between Nasdaq-100 Index and U.S. Treasury bonds.
• Outperformed the Nasdaq-100 Index in its short track record.
• Moderate liquidity and competitive expense ratio.

Risks

• Volatility: QQQH's exposure to the technology sector makes it susceptible to higher volatility compared to broader market ETFs.
• Market Risk: The ETF's performance is heavily dependent on the performance of the Nasdaq-100 Index and the overall market environment.
• Tracking Error: As an actively managed ETF, QQQH may not perfectly track the performance of its benchmark index.

Who Should Consider Investing

QQQH is suitable for investors who:

• Seek positive absolute returns with limited downside risk.
• Are comfortable with the volatility associated with the technology sector.
• Have a long-term investment horizon.
• Understand the risks associated with actively managed ETFs.

Fundamental Rating Based on AI

Rating: 7.5 out of 10

Justification: QQQH's unique strategy, track record of outperformance, and experienced management team are positive factors. However, its relatively short track record, higher expense ratio, and exposure to market volatility warrant some caution.

Resources and Disclaimers

• Innovator ETFs Website: https://www.innovatoretfs.com/
• Morningstar ETF Profile: https://www.morningstar.com/etfs/arcx/qqqh/performance

Disclaimer: The information provided in this analysis is for general educational purposes only and should not be considered investment advice. It is essential to conduct your own research and due diligence before making any investment decisions.