As advisors are faced with the prospect of lower equities and bond returns, new developments in Defined Outcome ETFs may hold a timely solution.
In the upcoming webcast, New Developments in Defined Outcome ETFs, Bruce Bond, Co-Founder and CEO, Innovator ETFs; and Graham Day, Vice President of Product and Research, Innovator ETFs, will present their flagship buffer ETFs alongside a Defined Outcome solution that seeks better-than-market upside, to a cap, without taking on additional downside risk. Knowing potential outcomes prior to investing can help advisors re-think portfolio construction, especially in the face of lower future returns.
Innovator Capital Management, LLC is bringing to market a new suite of accumulation-oriented Defined Outcome ETFs, or so-called Innovator Accelerated ETFs, the world’s first ETFs to seek to offer a multiple of the upside return of a reference asset, up to a cap, with approximately single exposure on the downside.
As part of Innovator’s Defined Outcome ETF family, the Accelerated ETFs will offer advisors the ability to accelerate a portfolio’s equity performance to a cap over a one-year or three-month outcome period. The Accelerated ETFs represent another ETF industry milestone in Innovator’s path to disrupting the asset management and insurance industries to benefit both advisors and the end-investor.
Specifically, the new Accelerated ETF suite includes: Innovator U.S. Equity Accelerated ETF – April (XDAP), Innovator U.S. Equity Accelerated 9 Buffer ETF – April (XBAP), Innovator U.S. Equity Accelerated ETF – Quarterly (XDSQ), and Innovator Growth-100 Accelerated ETF – Quarterly (XDQQ). The four ETFs will be listed on April 1.
The Innovator U.S. Equity Accelerated ETF – April will seek to provide investors with double the upside performance of SPY, to a cap, with approximately single exposure to SPY on the downside, over a one-year outcome period.
The Innovator U.S. Equity Accelerated 9 Buffer ETF – April will seek to provide investors with double the upside performance of SPY, to a cap, with approximately single exposure to SPY on the downside and a buffer against the first 9% of losses in SPY, over a one-year outcome period.
The Innovator U.S. Equity Accelerated ETF – Quarterly will seek to provide investors with double the upside performance of SPY, to a cap, with approximately single exposure to SPY on the downside, over a three-month, or quarterly, period.
Lastly, the Innovator U.S. Equity Accelerated Plus ETF – April will seek to provide investors with triple the upside performance of SPY, to a cap, with approximately single exposure to SPY on the downside, over a one-year outcome period.
Additionally, Innovator is working on the Innovator Upside: 3x SPY to a Cap (XTAP) and Innovator Upside: 3x QQQ to a Cap (QTAP), which Innovator says will be “coming soon.”
The Innovator Growth-100 Accelerated ETF – Quarterly will seek to provide investors with double the upside performance of QQQ, to a cap, with approximately single exposure to QQQ on the downside, over a three-month or quarterly period.
The Innovator Growth-100 Accelerated Plus ETF – April will seek to provide investors with triple the upside performance of QQQ, to a cap, with approximately single exposure to QQQ on the downside, over a one-year outcome period.
The shorter outcome period of the quarterly outcome period ETFs (XDSQ, XDQQ) means they will follow the reference asset (SPY or QQQ) more closely but will have lower starting caps. Investors can use both outcome periods to tactically respond to changing market conditions should they wish to do so. The first outcome period for each of the three Accelerated ETFs will be slightly longer than the subsequent outcome periods due to the ETFs’ launch date.
The Accelerated ETFs will not be like leveraged ETFs, which typically seek to provide a magnified exposure on both the upside and the downside daily and can compound risk with higher volatility when held long-term due to their frequent, often daily, rebalancing. Instead, the Accelerated ETFs will seek to provide asymmetrical returns over either a typically annual or quarterly outcome period that are magnified on the upside only, to a cap. Innovator’s Accelerated ETFs will rebalance annually or quarterly, making the funds more suited for asset allocation and longer-term investors rather than tools for ultra-tactical trading. In the Accelerated ETFs case, it is important to note that investors must hold shares for an entire outcome period to achieve the enhanced returns that a fund seeks to provide.
Financial advisors who are interested in learning more about defined outcome strategies can register for the Tuesday, March 30 webcast here.