On Thursday, Innovator Capital Management, LLC announced the launch of the Innovator Defined Wealth Shield ETF (BALT). Listing on the Cboe today, BALT will use options on SPY (SPDR S&P 500 ETF Trust) in seeking to provide exposure to the equity market to a cap while targeting a significant buffer against losses in SPY each calendar quarter.
BALT provides investment returns by allowing investors to participate in the upside of the equity markets with a significant buffer against losses, but it does not provide fixed income typical of bonds. The Innovator Defined Wealth Shield ETF seeks to offer advisors a defensive investment strategy intended as an alternative to cash, short-term debt, and core bond strategies common in traditional portfolio construction and conservative allocations.
Return profile for the Innovator Defined Wealth Shield ETF, as of 7/01/21
|BALT||Innovator Defined Wealth Shield ETF||20.00% / Qtr||0.70% / Qtr||3 months
7/01/21 – 9/30/21
** Although the ETF targets a 20% buffer, the buffer may fall into a range of 15% to 20%; there is no guarantee that the buffer will be within this range or that the Fund will provide the buffer. The Upside Cap above is shown gross of the .175% quarterly (0.69% annual) management fee for BALT. “Cap” refers to the maximum potential return, before fees and expenses and any shareholder transaction fees and any extraordinary expenses, if held over the full Outcome Period. “Buffer” refers to the amount of downside protection the fund seeks to provide, before fees and expenses, over the full Outcome Period. Outcome Period is the intended length of time over which the defined outcomes are sought. Upon commencement of the Outcome Period, the remaining Cap and/or Buffer can be found on a daily basis via www.innovatoretfs.com.
With bond yields near historic lows and money market funds yielding less than .1% while duration is extended and interest rate risk elevated, Innovator thinks that BALT – with its measured quarterly upside potential to SPY – could be a compelling alternative to short-term treasuries, bond funds, and cash on the sidelines for advisors looking to sidestep the negative portfolio impacts offered by the current low rate yield environment.
“Many advisors I talk to today have deep concerns when it comes to bonds. They know bonds come with low yields and historically high-interest rate risk, but they don’t know of reasonable alternatives for their clients. That is precisely why we created BALT. We think BALT can help investors diversify their defensive allocations by working to reduce interest rate risk while maintaining a defensive, risk-managed posture towards equities,” said Bruce Bond, CEO of Innovator ETFs. “We are excited to bring this product to market and continue innovating on behalf of advisors and their clients.”
“While the economy is opening up and people are starting to safely get back to normal, we think advisors are starting to realize there is a different kind of pandemic in fixed income markets, and they are feeling the symptoms as they attempt to construct conservative portfolios for risk-averse clients, especially those nearing retirement or in the deaccumulation phase,” said John Southard, CIO of Innovator ETFs.
“With historically low yields and real rates deeply negative, while duration remains extremely extended and strong inflationary pressures that are debatably ‘transitory’ abound, we think it’s going to be more difficult for advisors to effectively construct defensive portfolios with traditional allocations to cash, short-term treasuries, and core bond funds. Troubling dynamics with inflation, debt issuance, and deficits all boil down to significant potential pressures on rates, negative real returns for cash and short-term bond strategies, as well as principal losses for bond funds. In this environment, we think many advisors are looking for potential alternatives to their bond allocations and new solutions that can diversify the return sources within the defensive portions of their portfolios while maintaining risk management features – and we think BALT, the Innovator Defined Wealth Shield ETF, can help.”
For additional information, visit www.innovatoretfs.com.
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