IDX debuts risk-managed innovation ETF

Nov 27th, 2023 | By | Category: Equities

IDX Shares has launched a new actively managed ETF in the US providing risk-managed exposure to the technological innovation investment theme.

Ben McMillan, Chief Investment Officer at IDX Shares

Ben McMillan, Chief Investment Officer at IDX Shares.

The IDX Shares Dynamic Innovation ETF (DYNI US) has been listed on Nasdaq with an expense ratio of 1.05%.

According to IDX Shares, the strategy offers a unique blend of growth exposure with the potential for enhanced risk management relative to long-only investments.

The fund is structured as an ETF-of-ETFs, primarily investing in theme-based equity ETFs.

The fund’s core objective is the identification of emerging, innovative, and disruptive themes characterized by substantial market demand. The fund then rotates among these themes, selecting ETFs that focus on them.

This selection process employs a rules-based, quantitative approach that assesses the momentum and historical volatility of eligible ETFs, with a preference for those exhibiting strong momentum.

The chosen ETFs are weighted inversely to their volatility, aiming to manage overall portfolio volatility while optimizing exposure to selected themes.

The fund’s asset allocation is adjusted weekly to adapt to changing market conditions and evolving themes, with possible tactical shifts based on market and economic trends.

In periods where innovation-themed ETFs are less favorable, the fund may allocate to defensive equity ETFs including value or low volatility strategies, similarly weighted by volatility. Additional risk management includes the occasional use of covered call or covered put option strategies.

Ben McMillan, Chief Investment Officer at IDX Shares, said: “In today’s fast-paced and ever-changing investment landscape, it’s crucial for advisers and investors to have access to innovative tools that can help manage risks and capitalize on opportunities efficiently. The IDX Dynamic Innovation ETF does just that by dynamically allocating capital to the Innovation Economy and defensively rotating to lower volatility equity exposures during potentially turbulent times. We believe this approach can provide investors with a competitive advantage in the market.”

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