On Friday, Innovator Capital Management, LLC announced plans to bring to market a new suite of accumulation-oriented Defined Outcome ETFs, the 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.
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 advisors and the end-investor.
Anticipated to list April 1st on the Cboe, the initial Innovator Accelerated ETFs are below:
| Ticker | ReferenceAsset | Upside toCap | Downside | AverageCap** | OutcomePeriod | AnticipatedListing | |
|---|---|---|---|---|---|---|---|
| XDAP | SPY | 2X | 1X | 19.55% | Annual | 4/1 | |
| XBAP | SPY | 2X | 1X, 9%Buffer | 11.46% | Annual | 4/1 | |
| XDSQ | SPY | 2X | 1X | 8.12% | Quarterly | 4/1 | |
| XTAP | SPY | 3X | 1X | 17.06% | Annual | TBD | |
| XDQQ | QQQ | 2X | 1X | 11.33% | Quarterly | 4/1 | |
| QTAP | QQQ | 3X | 1X | 22.23% | Annual | TBD |
“The Accelerated ETFs have always been part of the vision for our Defined Outcome ETF lineup, and we are very excited to introduce them to advisors and ETF investors,” said Bruce Bond, CEO of Innovator ETFs. “The Accelerated ETFs seek to enhance investors’ equity performance potential to a cap without taking on additional downside risk. This is a growth investing product concept we’ve been working diligently on since 2017, when we filed for our first Buffer ETFs. And now, for the first time ever in an ETF, investors who hold shares for an entire outcome period will have access to potentially double or triple the upside of SPY or QQQ, to a cap, with approximately single exposure on the downside. This means that in instances when SPY or QQQ returns less than the cap over the outcome period, and the investor holds the respective Accelerated ETF for the entire outcome period, they will have the potential to outperform the respective market.”
“Given the popularity of such asymmetric accelerated or enhanced equity return strategies in other structures, we think the Accelerated ETFs will really resonate with advisors who have been attracted to these types of strategies but were deterred by the illiquidity, opacity, high relative costs, and credit risk of structured notes,” said John Southard, CIO of Innovator ETFs. “No one can predict the future but, if history is a guide, certain domestic equity markets could have a very slim chance of beating the annualized returns they’ve produced over the recent decade. With valuations elevated, Wall Street strategists are near-unanimously forecasting a low to moderate growth environment for domestic large-cap equities in the mid- to long-term outlook. The Accelerated ETFs seek to provide the potential to enhance returns in such challenging environments, helping to support investors’ accumulation goals.”
Bond added, “With the launch of Innovator Accelerated ETFs, investors will have even greater ability to construct strategic, diversified portfolios with Defined Outcome ETFs. Alongside our Stacker ETFs, we believe the Accelerated ETFs will provide powerful growth tools to potentially enhance equity returns while our Defined Outcome Buffer ETFs can be used for equity risk management and as alternatives to core bond allocations being confronted by the triple whammy of historically low yields, a steepening yield curve and the potential for elevated inflation.”
The Upcoming Innovator Lineup
On April 1st, Innovator plans to list the following Accelerated ETFs based on the large cap U.S. equity market through options on SPY (the SPDR S&P 500 ETF Trust): the Innovator U.S. Equity Accelerated ETF – April (XDAP); the Innovator U.S. Equity Accelerated 9 Buffer ETF – April (XBAP); the Innovator U.S. Equity Accelerated ETF – Quarterly (XDSQ); as well as the Innovator U.S. Equity Accelerated Plus ETF – April (XTAP).
- Innovator U.S. Equity Accelerated ETF – April (XDAP) 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.
- Innovator U.S. Equity Accelerated 9 Buffer ETF – April (XBAP) 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.
- Innovator U.S. Equity Accelerated ETF – Quarterly (XDSQ) 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.
- Innovator U.S. Equity Accelerated Plus ETF – April (XTAP) 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.
Also on April 1st, Innovator plans to list the following Accelerated ETFs based on growth stocks through options on QQQ (the Invesco QQQ Trust): the Innovator Growth-100 Accelerated ETF – Quarterly (XDQQ) and the Innovator U.S. Equity Accelerated Plus ETF – April (QTAP).
- Innovator Growth-100 Accelerated ETF – Quarterly (XDQQ) 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.
- Innovator Growth-100 Accelerated Plus ETF – April (QTAP) 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.
For additional information, visit www.innovatoretfs.com.
This article originally appeared on ETFTrends.com.
