Innovator Capital Management announced the launch of the Innovator Laddered Allocation Buffer ETF (BUFB) on the Cboe. BUFB will seek to offer investors a managed portfolio (an ETF of ETFs) that will invest equally across all 12 monthly U.S. Equity Buffer ETFs and rebalance semi-annually.
The underlying U.S. Equity Buffer ETFs each seek to provide a buffer against the first 9% of losses in the SPDR S&P 500 ETF Trust (SPY) and upside performance to a cap over a one-year outcome period. The laddered approach to BUFB means that the underlying U.S. Equity Buffer ETFs have outcome periods ranging from less than one month to one year.
Each month, one U.S. Equity Buffer ETF concludes its one-year outcome period and resets its options on SPY for the coming year. BUFB’s managed strategy can provide advisors and money managers an efficient way to incorporate the benefits of Buffer ETFs — risk management with upside exposure to equities — into balanced portfolios, retirement accounts, target-date funds, and model portfolios.
Innovator’s intention with BUFB is to provide investors a managed approach to Buffer ETF investing that maintains upside growth potential by continuously participating in new upside caps as the underlying ETFs reset monthly — and which can be allocated to at any point during the year.
BUFB will seek investment results that correspond generally (before fees and expenses) to the price and yield of the MerQube US Large Cap Equity Buffer Laddered Index. BUFB will generally invest at least 80% of its net assets (including investment borrowings) in securities comprising this index.
Bruce Bond, CEO of Innovator ETFs, said that BUFB “will seek to allow advisors to own the market with built in buffers but without the need to evaluate the parameters of each monthly series. BUFB can help smooth out the equity investing experience by investing in Buffer ETFs that historically have shown lower volatility, beta, and drawdowns relative to SPY – the main benchmark for U.S. stocks – yet still participate in a healthy amount of the upside that equities can provide over time.”
Bond added: “There are many portfolio applications for this new ETF, and we’re excited to have it joining BUFF as potential solutions during a confusing market environment that is challenging both sides of a traditional balanced portfolio. These ETFs can potentially smooth out the equity investing experience and reduce the effects of severe market downturns, something that is so important for pre-retirees and retirees who are sensitive to sequence of returns risk.”
The launch of BUFB builds out Innovator’s Managed Outcome ETF lineup. The funds within the Managed Outcome ETF suite seek to provide investors with diversified portfolios based on Innovator’s 80 Defined Outcome ETFs.
BUFB has an expense ratio of 0.89%.
BUFF: Name Change and Fee Reduction
In addition, Innovator also announced planned changes to its BUFF ETF, comprised of an equal-weight allocation to each of the 12 Innovator U.S. Equity Power Buffer ETFs that seek to provide the upside of large-cap U.S. stocks, subject to caps, while buffering against the first 15% of U.S. equity losses.
BUFF became the first fund of Buffer ETFs composed of twelve monthly underlying Buffer ETFs on large-cap U.S. stocks when it was converted from a previous strategy in August, 2020.
Previously named the Innovator Laddered Fund of U.S. Equity Power Buffer ETFs, on Wednesday, BUFF changed its name to the Innovator Laddered Allocation Power Buffer ETF.
Additionally, BUFF’s total expense ratio will be reduced by 10 basis points, to 0.89% from 0.99%.
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