Today, Innovator ETFs launched its latest fund, the Innovator U.S. Small-Cap Managed Floor ETF (RFLR). With a net expense ratio of 0.89%, RFLR operates with an active portfolio management team. The fund offers investors the potential for capital appreciation, while aiming to mitigate the amount of losses they may experience.
“Many investors and advisors are gravitating towards small-caps to diversify their exposure and capture the Russell 2000’s growth potential. However, many more are sitting in cash for fear of a market drop,” noted Graham Day, CIO at Innovator ETFs.
“Following a large market decline, it can take years to recover losses even in well-performing segments of the market,” he added. With RFLR, investors are able to allocate toward small-caps with built-in risk management against large declines. We believe RFLR will serve as a solution for investors aiming to mitigate their risk of volatile swings in small-caps, and to provide a level of confidence to investors sitting on the sidelines in cash.”
The wide majority of assets within RFLR go toward gaining exposure to U.S. small-cap equities. The fund accomplishes this by investing both in direct equity securities and options contracts that provide economic exposure to U.S. small-cap equities.
Regarding the equity strategy, RFLR invests in equities within the Solactive United States 2000 Index. This index tracks the performance of some of the largest small-caps available on the U.S. stock market. To gain exposure to the index, RFLR uses a representative sampling strategy.
Downside Option
Corresponding to Innovator’s Managed Floor strategy, RFLR will both buy and sell option contracts. The fund’s options portfolio provides call and put option contracts that reference the price return of the Russell 2000.
This options portfolio is constructed to protect investors against some of the losses the fund may incur. Security for the fund is implemented with floors that limit potential losses to 10% of the Russell 2000 Index, as measured at the end of one-year periods. These floors are laddered and implemented on a quarterly basis.
“Small-cap investing has returned to favor in the second half of the year, but many advisors remain uncertain of the risks,” noted Todd Rosenbluth, head of research at VettaFi. “It’s great to see Innovator continue to expand its lineup as a leader in the buffered ETF market.”
A proven contender in managed unique fund strategies, Innovator has over 130 ETFs listed in the United States. In total, these funds represent over $20 billion in assets under management.
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