This is a defined outcome ETF that uses options to provide a predetermined upside cap and a buffer against initial losses over an outcome period of about one year, based on the price performance of the iShares MSCI EAFE ETF. It is a series whose outcome period is reset each December.

It suits investors who want exposure to developed international equities with a set range of downside cushioning, and who plan to hold through the end of the outcome period.

It is an actively managed ETF run by First Trust.

The fund combines FLEX options based on the price performance of an underlying developed international equity ETF. In exchange for cushioning the initial downside during the outcome period, it places a cap on upside gains. The intended buffer and cap apply when shares are bought on the first day of the outcome period and held to maturity. For purchases made mid-period, the range that applies will differ.

• Provides a predetermined downside buffer range
• Applies a per-outcome-period cap to developed international equity exposure

Assets under management (AUM) are $166.3M, and the expense ratio is 0.90% per year.

Compared with series that use the same buffer structure but reset in other months, and with the emerging markets version, it differs in the regions it covers and in the timing of its outcome period.

The fund follows the movements of the underlying developed international equity market, but because of the options structure, gains tend to be limited at the cap while losses tend to be partly absorbed within the buffer range. Returns are also affected by exchange rates and by swings in global equity markets.

Defined outcome buffer ETFs tend to draw more interest as downside protection when market volatility rises, and money sometimes flows in from investors who want developed international exposure together with a buffer structure. The size of those flows varies with the outcome period and the market environment.

Its strengths are a predetermined downside buffer and developed international exposure, while the upside cap and the requirement to hold to maturity can work against it.

The comparison products shown in the table for the same category, IJAN, IAPR, IJUL, and IOCT, are developed international buffer ETFs from another issuer and are monthly series with different reset timing, while EJAN is a buffer ETF based on emerging markets. For investors who want direct exposure to developed international equities without a buffer structure, a product such as EFA, which directly holds the underlying developed international equities, is worth considering.

Here are the points to check before investing in YDEC. For buffer ETFs, the range that actually applies depends on the buffer structure, the upside cap, and the purchase date, so confirming these in advance is important.

The upside cap limits returns in a bull market, and buying midway through the outcome period may mean you do not receive the full intended buffer range. If the underlying developed international equity market falls by more than the buffer range, losses will occur.

The fund suits investors who want exposure to developed international equities while easing downside volatility, and it is best considered alongside a strategy of buying on the first day of the outcome period and holding to maturity.