Innovator ETFs has taken its family of defined outcome “Buffer” ETFs to a new level, and continues to roll out funds for the series on a monthly basis. All of the funds are tied to the S&P 500 Price Index with caps on the upside they offer, but also protection against declines in the index. The August set debuted today, and are as follows:
- Innovator S&P 500 Buffer ETF — August (BAUG)
- Innovator S&P 500 Power Buffer ETF — August (PAUG)
- Innovator S&P 500 Ultra Buffer ETF — August (UAUG)
The three funds launched on Cboe Global Markets, parent company of ETF.com. Each comes with an expense ratio of 0.79%.
The funds in the Buffer family all hold portfolios of Flexible Exchange (FLEX) options on the S&P 500 Price Index. Originally, Innovator had launched three funds every quarter, but is currently in the process of making sure a set of its Buffer ETFs is available for every month.
Caps & Buffers
The outcome period of the trio is Aug. 1, 2019, to July 31, 2020, with the funds resetting on Aug. 1, 2020. The caps are reset annually, while the downside protection for each fund is static. Caps for the one-year outcome period are determined by current market conditions and the pricing of the underlying options.
BAUG’s cap before the 0.79% expense ratio is 13.60% and 12.81% after. The fund protects against a 9% decline from its index level on its reset day.
PAUG’s cap before the expense ratio is 8.98% and 8.19% after, with the fund protecting against a 15% decline in the index.
UAUG’s cap before the expense ratio is 8.93% and 8.14% after. The downside protection allows for a decline of 5%, but protects against any further downside up to a 35% loss.
Investors buying a fund after its reset date will experience returns different from what they would if they purchased it on the reset date, and Innovator provides a tool on its website so investors can see each fund’s performance relative to its cap and buffer.
The Innovator ETFs website also offers a tool for investors to see how the buffers and caps are working for each fund in the family, so they know where they stand if they do not purchase a fund during its reset.
Contact Heather Bell at [email protected]