Innovator Capital Management recently marked the successful completion of the initial outcome period for its Defined Outcome Buffer exchange traded funds that aim to hedge risk and help investors build better portfolios
“We are very pleased with the performance of the first three S&P 500 Buffer ETFs during their initial Outcome Period,” Bruce Bond, CEO of Innovator Capital Management, said in a note. “Our inaugural series of Defined Outcome ETFs did exactly what we expected them to do-ending the outcome period in line with the return of S&P 500 Price Return Index, with about half the volatility, and with significantly lower drawdowns along the way.”
Specifically, Innovator recently completed its one-year run on its July series. Its suite includes the Innovator S&P 500 Buffer ETF (CBOE: BJUL), which is designed to track the return of the S&P 500 (up to a predetermined cap) while buffering investors against the first 9% of losses over the Outcome Period, before fees and expenses. The Innovator S&P 500 Power Buffer ETF (CBOE: PJUL) is designed to track the return of the S&P 500 (up to a predetermined cap) while buffering investors against the first 15% of losses over the Outcome Period, before fees and expenses. Finally, the Innovator S&P 500 Ultra Buffer ETF (CBOE: UJUL) is designed to track the return of the S&P 500 (up to a predetermined cap) while buffering investors against a decline of 30% of losses over the Outcome Period, from -5% to -35%, before fees and expenses. Investors are exposed to loss between 0% and 5% and over 35% over the Outcome Period, before fees and expenses.
The Defined Outcome ETFs provide defined outcomes over one-year periods, are rebalanced annually, and can be held indefinitely. The July Series of S&P 500 Buffer ETFs was reset on June 28, 2019.
As a result of the ETFs’ downside buffers, along with their upside caps, the ETFs exhibited significantly less volatility and drawdowns than the S&P 500 Index. Additionally, the ETFs matched the Index return, before management fees.
“Everything went as expected. We were able to deliver the Defined Outcome over the first year,” Bond told ETF Trends. “We are trying to convey to advisors and investors that the products are working as expected.”
Next up, Bond explained that Innovator will round out its suite of Defined Outcome ETFs to include defined outcome strategies for the month of August and September. Innovator first started out with a suite quarterly Defined Outcome ETFs, and it is now trying to fill in the gap months in between for a full year period to “get involved for all months of the year,” Bond added.
The Defined Outcome strategy seems to be popular with many investors and financial advisors. Bond explained that Innovator has filled patent protection for its products as other money managers are looking into bringing similar strategies to market.
For more information on innovative strategies, visit our Innovative ETFs Channel.
