Innovator Capital licenses second IBD index for ETF creation

Dec 21st, 2017 | By | Category: Equities

Innovator Capital Management has licensed the IBD ETF Leaders Index from Investor’s Business Daily (IBD) to underlie a new ETF. The Innovator IBD ETF Leaders ETF (LDRS US) is expected to begin trading shortly on NYSE Arca.

Innovator Capital licenses second IBD index for ETF creation

LDRS will focus on technical indicators to select strong performing ETFs it thinks are likely to continue outperforming.

“Because our indices are based on our proprietary data and our tried-and-true CAN SLIM Investing System, they have helped countless investors achieve their goals,” said Chris Gessel, chief content officer of IBD. “Now, Innovator has licensed these high-performing indices to develop something novel and powerful in the world of ETFs, which presents a tremendous opportunity for investors and robo-advisors alike.”

LDRS is an ETF of ETFs as the underlying index is composed exclusively of ETFs. The methodology applies the firm’s proprietary data and analysis to a universe of ETFs providing exposure to US equities, international equities, fixed income and money markets.

With a heavy focus on technical indicators, the index selects strong performing ETFs that, according to the underlying research, are likely to continue their gains. The methodology permits the switch entirely out of an asset class or investing in sectors that can act as a hedge in weak markets, thereby offering a level of protection during downturns.

This is evident by the index’s notable outperformance of the S&P 500 when including the 07/08 financial crisis in a back-tested model – between 1 June 2005 and 29 September 2017, the IBD ETF Leaders Index returned a compounded annual growth rate (CAGR) of 20%, while the S&P 500 CAGR is approximately 6%. Back-testing performance is susceptible to some biases however, and investors should be aware that the index may not outperform across all market conditions.

The index is rebalanced on a monthly basis.

The fund’s prospectus did not list an expected total expense ratio (TER) for LDRS.

Innovator Capital also offers the Innovator IBD 50 Fund (FFTY US) as part of its ETF lineup. Launched in September 2015 as an actively managed fund, FFTY recently made the move to fully passive management and now tracks the IBD 50 Index (See: “IBD 50 ETF switches from active to passive”).

The index targets 50 growth stocks within the total US equity universe of approximately 7,000 equity securities that trade on the NYSE or Nasdaq. Stocks with stronger growth characteristics, as determined by IBD’s proprietary methodology, are assigned a higher weight in the index.

FFTY has approximately $250 million in assets under management and a TER of 0.80%.

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