In an era when market volatility often spooks even the most steadfast investors, innovative exchange-traded funds (ETFs) can offer a safe haven for those seeking both growth and protection. Wealth Advisor Managing Editor Scott Martin recently joined Graham Day, Senior Vice President and Chief Investment Officer at Innovator Capital Management, to discuss a groundbreaking ETF that aims to minimize the impact of market downturns while seizing the growth potential of the Nasdaq 100.
Innovator’s Laddered Floor ETFs are crafted to foster capital growth, cushion against market volatility, and offer a bulwark against severe market declines. Day singles out the Nasdaq-100 Managed Floor ETF (ticker symbol: QFLR) for its potential appeal to technology investors. QFLR is designed to offer exposure to the Nasdaq 100 with a built-in mechanism to limit losses. This ETF embodies a strategic approach to investing in tech, acknowledging the sector’s significant potential for growth and inherent volatility.
QFLR owns the Nasdaq 100 but incorporates a 10% floor, Day explains, aiming to protect 90% of an investor’s capital annually while still allowing for participation in the index’s upside. This structure is particularly appealing in a market landscape where technology stocks have seen unprecedented gains but carry the risk of sharp corrections.
The practical implications for advisors and their clients are easily understood. Given the fear of significant market downturns and the resultant investor anxiety, QFLR, with its protective floor, emerges as an innovative solution for those wary of market instability but eager to engage with high-growth sectors. It’s positioned as an ideal instrument for risk-averse investors, such as pre-retirees or retirees who prioritize capital preservation.
To mitigate the costs associated with its downside protection, Innovator has forged a strategic partnership with Parametric Portfolio Associates. This collaboration ensures that investors can aim for a significant slice of the Nasdaq 100’s growth potential—between 70% and 80%—while maintaining a protective guardrail against market downturns. The blend of core equity exposure and a meticulously calibrated options strategy implemented by Parametric strikes an optimal balance between risk and return, accentuating the ETF’s allure. QFLR offers investors a safety net without completely forgoing the potential for appreciable growth in tech.
Beyond its utility as an investment strategy, QFLR is also valuable as a prospecting tool for advisors. For the many investors who have remained on the sidelines hoarding cash, apprehensive about market volatility, this laddered floor ETF offers a compelling entry point, enabling them to gradually enter the market while still maintaining a level of hedging and downside protection. Advisors can assure potential clients that they can participate in the market’s growth opportunities without losing sleep over the possibility of steep losses.
QFLR exemplifies the broader trend in financial markets toward innovative investment vehicles that cater to investors’ dual desires for growth and security. As technology continues to assume a more significant portion of investment portfolios, solutions such as QFLR represent a forward-thinking approach to navigating the complexities of modern markets.
Advisors and broker-dealers to stay informed about innovative ETFs that can benefit their clients. QFLR, with its focus on the Nasdaq 100 and its built-in floor for downside losses, offers a compelling solution for investors looking to add technology to their portfolios while managing risk. This fund offers core equity exposure with an options overlay, is designed to track large-cap U.S. equities with reduced volatility, and is engineered to limit losses in large market drawdowns. By understanding the potential benefits and trade-offs of QFLR, advisors can better serve their clients and attract new ones with this unique investment strategy
ETF innovation, exemplified by solutions such as QFLR, stands at the forefront of meeting investor needs in an ever-changing world. Through thoughtful design and strategic partnerships, these funds offer a pathway to participate in significant growth sectors such as technology while mitigating the fears that often accompany investment decisions. For advisors and their clients, this innovation represents not just a strategy but a new paradigm in investing that harmonizes growth with protection.
