Innovator Capital Management recently announced the three-year anniversary of its Defined Outcome ETFs, led by the launch of the flagship Buffer ETFs in 2018. In that three year time period, they have accumulated over $5 billion in AUM as they pioneered a new industry.
The Defined Outcome ETF family boasts over 70 options, including the Buffer ETFs that offer risk mitigation in downturns, to enhanced equity options with the Accelerated ETFs that over double or triple SPY or QQQ returns, up to a cap.
The initial Buffer ETFs, Innovator S&P 500 Power Buffer ETF (PJUL) and Innovator S&P 500 Ultra Buffer ETF (UJUL), which are meant to protect portfolios in periods of volatility and drawdown, were launched on the Cboe on August 8, 2018. Their popularity is reflected in having exceeded $1 billion in net flows year-to-date for the third year running. There are now around 130 similar ETFs in the space, with over $8 billion AUM total.
“When we returned to the ETF industry, we had a big picture vision to help solve some of advisors’ and investors’ biggest challenges – like how to remain invested at record highs and historically high valuations as well as through hair-raising volatility and drawdowns, and how to get cash off the sidelines and put it to work so investors can meet their financial goals,” said Bruce Bond, co-founder and CEO of Innovator.
“By pioneering and building out the leading Defined Outcome ETF™ lineup – from the Buffer ETFs™ that seek to put guard rails on the investing process and the Accelerated ETFs™ that seek to multiply equity returns, to a cap – we feel that is just what we’re doing,” Bond explained.
Success of the Buffer ETFs after the Q4 2018 correction have drawn increasingly more investors in when markets are facing potential drawdowns. Last March, with the shutdown and resultant crash in the markets from, the Buffer ETFs experienced record monthly inflows.
“With the liquidity, transparency, structural simplicity, absence of credit and counterparty risk and lower relative fees, we strongly feel the ETF is the superior vehicle for investing in defined outcome strategies, and we plan to continue using the power of the ETF to take market share from legacy structures for the benefit of advisors and end investors,” co-founder and CIO John Southard said.
The Defined Outcome ETFs have five different categories:
- Buffer ETFs: The flagship product, which participates in upside movement, while buffering for a set level of loss over either a quarter or a year
- Accelerated ETFs: Seek double or triple the upside of SPY or QQQ to a cap and have only single exposure on the downside
- Stacker ETFs: Give “stacked” exposure to the upside of several equity markets while offering single exposure on the downside.
- Defined Outcome Bond ETFs: Work to maximize diversification benefits bonds offer while having a built-in floor against loss
- The Innovator Defined Wealth Shield ETF (BALT): Seeks to provide upside exposure of large caps and has a targeted buffer over each three month period of the first 20% of losses by SPY.
Innovator has made tools to understand the return profiles, mechanics, and behaviors of the ETFs available for free on its website.
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