Structured ETFs

08 February 2022
Timothy McKenna, Dr. Airat Chanyshev, and Cinnie Lin

Unlike traditional exchange traded funds, Defined Outcome exchange traded funds (DO ETFs) offer the chance to provide investors with known ranges of future investment outcomes before investing. The increase in the number of DO ETFs offered and their assets under management make it prudent to analyze the mechanics of these newer asset types. 

In this article, Associate Directors Timothy McKenna and Dr. Airat Chanyshev and Analyst Cinnie Lin outline the mechanics, unusual features, and returns of DO ETFs. They find that even though this type of fund may offer the potential to limit losses, their unique and complex features could lead to confusion, complaints, and related litigation. The authors conclude that DO ETFs may not be suitable for some investors depending on risk profiles and investment timing, and the timing of one’s purchase of a DO ETF may change the range of returns an investor could achieve.