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Defined Outcome ETFs for Downside Protection

Neena Mishra
While the IPO fund offered stellar returns in the first half, the second-half should be great on a host of pending listings.
  • (0:35) - Bruce Bond's Launch Of Innovator Capital Management 
  • (3:45) - Overview of Defined Outcome Series ETFs: Structure and Buffer Levels
  • (10:30) - Understanding the Terminology and Resources
  • (15:45) - When Is The Best Time To Purchase These ETFs?
  • (19:15) - What Are The Risks and Drawbacks For Defined Outcome ETFs?
  • (22:50) - Will Innovator Capital Management Expand The Product Line Up?
  • (25:20) - What Kind Of Investors Are These Products Best Suited For?
  • (28:45) - Smart Beta and Fee War Trends
  •             Podcast@Zacks.com

In this episode of ETF Spotlight, I talk with Bruce Bond, CEO of Innovator Capital Management. We discuss Innovator Defined Outcome ETFs that provide exposure to the S&P 500 upside performance with defined downside buffers.

Bruce is one of the pioneers of the ETF industry. He co-founded PowerShares back in 2003, and introduced the first smart beta ETF and the first active ETF, among others. PowerShares was sold to Invesco in 2006. Innovator Capital Management was formed in 2014.

Defined Outcome ETFs allow investors to participate in the market upside to a cap while limiting losses if the market falls. Bruce explains how these ETFs are constructed and walks us through the product lineup. The suite has 12 ETFs that reset in July, October, January and April, with downside buffer levels of 9%, 15%, and 30% respectively.

For example, the recently launched April series is comprised of the Innovator S&P 500 Buffer ETF -April BAPR, which has a 9% buffer, the Innovator S&P 500 Power Buffer ETF - April PAPR, which has a 15% buffer and the Innovator S&P 500 Ultra Buffer ETF - April UAPR, which has a 30% buffer.

The July series includes the Innovator S&P 500 Buffer ETF BJUL, the Innovator S&P 500 Power Buffer ETF - July PJUL and the Innovator S&P 500 Ultra Buffer ETF - July UJUL.

These are actively managed ETF that come with an expense ratio of 0.79% each. While Innovator encourages investors to buy these products at the reset period, they can be purchased at any time.  What kind of performance should investors that buy after the first day expect?

We also discuss how investors can use these products in their portfolios and Innovator’s expansion plans for the Defined Outcome suite of ETFs.

Finally we discuss some the latest trends in the ETF world, like the fee wars, non-transparent ETFs and the rising popularity of smart beta ETFs.

Please visit InnovatorETFs if you want to learn more about these products. Make sure to be on the lookout for the next edition of ETF Spotlight! If you have any comments or questions, please email podcast@zacks.com.

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SPDR S&P 500 ETF (SPY): ETF Research Reports
 
Innovator S&P 500 Ultra Buffer ETF - April (UAPR): ETF Research Reports
 
Innovator S&P 500 Power Buffer ETF - April (PAPR): ETF Research Reports
 
Innovator S&P 500 Power Buffer ETF - July (PJUL): ETF Research Reports
 
Innovator S&P 500 Buffer ETF - July (BJUL): ETF Research Reports
 
Innovator S&P 500 Ultra Buffer ETF - July (UJUL): ETF Research Reports
 
Innovator S&P 500 Buffer ETF - April (BAPR): ETF Research Reports
 
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