What is a period return?
A period return refers to the total return on an investment over a specific time frame. In the case of buffered ETFs, such as the ARK DIET ETFs, the period is typically 12 months, known as the outcome period. An investor’s period return is the net result of:
- How the underlying fund (for ARK DIET, ARKK – the ARK Innovation ETF) performs during that time
- The effect of the buffer and participation rate
- Any fees or expenses deducted
For example:
- If ARKK returns +30% over the period, and an investor entered the buffered ETF at the start with a 5% hurdle and an 80% participation rate, their period return might be around (30% – 5%) × 80% = 20%.
- If ARKK falls 20% during the period and the buffer absorbs 50% of losses, an investor’s period return would be around –10%.
It’s a way to measure how an investment performed from the start of one outcome period to the end.