Buffer ETFs are emerging as a solution for investors who have stayed largely on the sidelines even as first-quarter earnings grew 28%, according to panelists at a Goldman Sachs Asset Management media event in New York.
Key Takeaways:
- Q1 earnings grew 28%, but $15 out of every $16 invested is still flowing to bonds and money markets.
- Only 8% of ultra-high-net-worth clients believe their advisors deliver the risk management they say they want.
- Buffer ETF protection levels range from 9% to 20% or more, letting advisors tailor downside exposure per client.
Panelists at the Goldman Sachs headquarters event on May 27 included Greg Calnon, head of public investing at Goldman Sachs Asset Management; Graham Day, president of Innovator ETFs; and Osman Ali, global co-head of quantitative investment strategies at Goldman Sachs Asset Management.
At the center of the discussion was a stark disconnect. Corporate earnings are running at their strongest pace in years, yet most investors are still parking money in bonds and money markets rather than equities, Calnon said.
Calnon said first-quarter earnings grew 28%, with about 90% of companies having reported. Even stripping out big tech, earnings grew 14% in the first quarter, the highest in 10 years.
“The most frequent question that we get from clients is ‘How do I reconcile what I read in the news every single day with what’s happening in equity markets,’” Calnon said. He pointed to concerns including inflation, oil prices, and Fed rate expectations that shifted from four projected cuts at the start of 2026 to none.
For every $16 flowing into ETFs and mutual funds, $15 goes to bonds and money markets, according to Day. Meanwhile, just one dollar reaches equities, he said. A study from a separate asset manager found that while 80% of ultra-high-net-worth clients say they want risk management, only 8% believe their advisors actually deliver it, he added.
Day said bonds have failed to provide the expected portfolio cushion for the last five or more years, as both stocks and bonds fell in tandem during 2022. Buffer ETFs offer a way to quantify exactly how much risk a client is taking, he said. That’s something a traditional 60/40 portfolio cannot do.
Buffer Strategies Give Advisors a New Angle
Day explained that buffer levels can range from 9% to 20% or more depending on the product and outcome period. That built-in certainty is what has made these tools attractive to advisors trying to bring risk-averse clients off the sidelines.
Day described one RIA in Southern California who went from $200 million to $400 million in assets under management after incorporating buffer strategies and leading with a wealth preservation message.
Osman Ali said Goldman Sachs Asset Management has used AI in its data analysis for more than 15 years. It applies techniques such as pattern recognition and content extraction to build an informational edge. He noted that AI’s potential in investing can be overstated when underlying data has not been properly cleaned and structured.
“You have to have data, and not just data, but data that’s been cleaned and curated and modeled in a way that the AI can analyze,” Ali said.
Calnon noted that advisors today have more portfolio construction tools than at any point in the past decade. He added that the traditional split between stocks, bonds and cash no longer reflects how many practitioners are building portfolios.
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