It’s a stressful investing landscape right now and investors are feeling it. Volatility, driven by a chaotic geopolitical landscape, has defined much of the market narrative this year — perhaps just second to everything AI. Although markets have marched steadily upward, a growing number of investors are making more defensive moves to adapt. In fact, recent data from VettaFi suggests downside protection ETFs are gaining significant traction.
Key Takeaways:
- Investor anxiety is up and downside protection ETFs are in as a solution set.
- A recent VettaFi webinar saw investors express interest in ETFs with more defensive funds rather than standouts.
- Goldman Sachs recently acquired Innovator ETFs, a shop well known for its defensive funds.
The ETF landscape has seen significant product innovation in recent years, with increasing options for investors. While new offerings range from aggressive offensive strategies to defensive plays, downside protection ETFs are currently capturing more interest.
According to survey data from a recent VettaFi webinar, more investors indicated they prefer downside protection and covered call ETFs to their upside-chasing peers. For instance, 15% of survey respondents expressed interest in inverse ETFs and 9% in leveraged ETFs. By contrast, 55% expressed interest in covered call ETFs and 66% indicated interest in downside protection ETFs.
This comes as more and more firms are diving into the space as well. Goldman Sachs — already known for income ETFs like the Goldman Sachs S&P 500 Premium Income ETF (GPIQ ) — has recently acquired Innovator ETFs. The Innovator suite’s two most recent additions, the dual-directional and floor ETFs, represent the cutting edge of defensive fund strategies. While the floor ETFs are designed to limit downside by protecting investors against losses greater than 10%, the dual-directional ETFs compliment the strategy by delivering inverse performance and acting as a stabilizer for portfolios facing market volatility.
With today’s market uncertainty, increasing investor anxiety and continuing product innovation to meet ETF demand, Goldman Sachs has a growing pool of strategies like GPIQ — for investors looking to add income and/or downside protection to their portfolios.
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