ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Direct Indexing
    • Disruptive Technology
    • Energy Infrastructure
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Financial Literacy
    • Fixed Income
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Modern Alpha
    • Multifactor
    • Night Effect
    • Portfolio Strategies
    • Responsible Investing
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
  • Research
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF of the Week Podcast
    • ETF Prime Podcast
    • Video
  • Company
    • About VettaFi
    • Get VettaFi’ed
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Innovator Offers Upside With a Floor on Downside Risk
News
Share

Innovator Offers Upside With a Floor on Downside Risk

James ComtoisMay 26, 2022
2022-05-26

Innovator ETFs recently filed for two actively managed equity ETFs with the SEC: the Innovator Equity Managed Floor ETF on the S&P 500 Index) and the Innovator Technology Managed Floor ETF on the Nasdaq 100 Index), which are managed outcome funds that look to address tail risk in stocks. These funds are expected to hit the market this summer.

VettaFi recently spoke with Innovator ETFs co-founder and CEO Bruce Bond about how these ETFs can provide investors market upside with downside risk protection, how managed floor ETFs differ from defined outcome funds, and why now is the right time to bring these funds to the market.

VettaFi: Innovator ETFs just filed for two actively managed floor equity ETFs with the SEC. Tell us about these new funds and what type of investments they specialize in.

Bruce Bond: The idea with the new funds we’re doing with [the funds’ subadvisor] Parametric is to provide investors with the upside of equity markets while having a floor on their downside risk.

They’re like the defined outcome ETFs but a little different in that they don’t operate over specific outcome periods of a quarter or a year. While defined outcome funds have a buffer of 9% or 15%, these managed outcome ETFs represent a floor, where after that, you can’t lose any more.

There are not many products like this available in the industry. We do expect these funds to give investors significant upside to the market while having this built-in floor.

VettaFi: What’s the difference between a defined outcome ETF and a managed outcome ETF?

Bruce Bond: With defined outcome, you have a specific period where the buffer is over. Defined outcome ETFs have specific periods, and for most of those the buffers are over one year. We offer these funds at the beginning of each month because that entry point is important. So, for example, let’s say you get 22% of the upside and a 9% buffer, that is a specific agreement we’re making with investors over that one-year period that they can rely on.

With managed outcome, the period is rolling. It tends to blend that specific number a little bit. We target a 10% floor every time, but since it’s done over time, it can tend to blend, so you don’t have a specific defined outcome, you have more of a managed outcome.

This is an actively managed portfolio, therefore, your floor’s around 10%, so it’s not a specific outcome you’ll receive at the end of the year. That’s the reason why we can’t provide a specific outcome.

With defined outcome, the entry point is important; you need to get in at the beginning [of the specified period], whereas the entry point isn’t as important with these new managed outcome funds.

Also, defined outcome ETFs are made up of options contracts solely, whereas these new managed outcome funds have owned equities, and this is an overlay on those equities.

VettaFi: We’re currently in an environment of volatile markets and record high inflation. What makes this market ideal for these managed floor funds?

Bruce Bond: What makes it ideal is that if someone wants to get in today and wants to know they have a 10% downside risk in the market but are going to get a significant upside of the market, it takes away having to time this market perfectly. These funds allow advisors and investors to have a downside hedge against losses while at the same time having access to the potential upside of the market. For advisors, it’s a great product to have available to chop off that risk tail.

VettaFi: What are your long-term goals for these funds?

Bruce Bond: The 60/40 model has been challenged lately. It’s been holy grail over the last 10 years because rates have been staying low while stocks have been going up. But now, fixed income may not be providing [stability] and stocks may not be offering returns. So, this is another way for advisors and investors to get in the market but not be naked in the market and have no risk management exposure. This allows them to hop in with a risk overlay that gives them a certain amount of exposure and upside in the market. This is a great tool to be able to do that.

What we love about these strategies is you’re not depending on the timing of the market. It takes away a lot of the unknowns in the markets for investors.

For more news, information, and strategy, visit VettaFi.


Content continues below advertisement

» Popular Pages

  • Tickers
  • Articles

Jun 01

Mega-Caps for Mega Returns? The USMC ETF

Jun 01

When Broad Commodities Tumble, Consider Carbon Allowances

Jun 01

Hartford Rolls Out Active Core Bond ETF Strategy

Jun 01

Advisors Can Use Multifactor ETF ROUS to Take Smarter Risks

Jun 01

Currency-Hedged ETF DXJ Nears $2 Billion

Jun 01

Exchange Registration Now Open to Advisors

Jun 01

In Market Uncertainty, Play the Long Game Using Nationwide ETFs

Jun 01

CNBC Interviews John Davi About ETF Flows & AI

Jun 01

The Tech Sector Thumbs Its Nose at Higher Rates

Jun 01

Three Keys to Active ETF Investing in 2023

QQQ

Invesco QQQ Trust

SPY

SPDR S&P 500 ETF Trust

JEPI

JPMorgan Equity Premium...

VTI

Vanguard Total Stock Market...

VOO

Vanguard S&P 500 ETF

VGT

Vanguard Information...

TLT

iShares 20+ Year Treasury...

BND

Vanguard Total Bond Market...

XLP

Consumer Staples Select...

BOTZ

Global X Robotics &...


Content continues below advertisement

Loading Articles...
Our Sites
  • VettaFi
  • Advisor Perspectives
  • ETF Trends
Tools
  • ETF Screener
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Database Pro
More Tools
  • Financial Advisor & RIA Center
Explore ETFs
  • ETF News
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Information
  • Contact Us
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X