Innovator Buffer ETF Family Enters New Phase

June 03, 2019

Today, Innovator ETFs rolled out three more of its defined outcome ETFs. The new funds join the firm’s existing 12 ETFs and represent the start of a new phase for Innovator’s “Buffer” funds. The products launching today are as follows:

The three funds launched on Cboe Global Markets, parent company of ETF.com. Each comes with an expense ratio of 0.79%.

Like Innovator’s 12 existing ETFs, the new funds track the performance of the S&P 500 Price Index, but offer limited upside and also downside protection. They also reset annually on the first trading day of the month in their name.

The new ETFs launched today are significant because Innovator has decided to launch a trio of funds for each month of the year, rather than just each quarter.

Ultimately, the firm will offer 12 sets of ETFs offering varying degrees of downside protection for a grand total of 36 funds. That means investors will be able to lock in gains that may accumulate to one fund and then roll the assets into another fund to start fresh at the start of each month.

“We’re seeing really good participation on the first day of a new offering, so we know there’s pent-up demand and people are waiting to get involved when a new ETF is offered,” said Bruce Bond, co-founder and CEO of Innovator ETFs. “So we think by having them more often, people will be able to participate more freely. We’re trying to make it as simple and straightforward for investors as we can.”

How The Funds Work
The “Buffer” strategy provides limited upside, but protects against the first 9% of losses, so that investors do not lose any money unless the index declines more than 9%. The “Power Buffer” strategy provides protection against losses in the index up to 15%, while the “Ultra Buffer” strategy protects against losses greater than 5% but less than 35%.

With the group of funds launched today, net of fees, the cap on BJUN’s performance is 15.66% (16.45% gross), while PJUN’s upside performance cap is 9.73% (10.52% gross) and UJUN’s upside cap is 9.47% (10.26% gross).

The funds hold actively managed portfolios of FLexible EXchange Options (FLEX) on the S&P 500 Price Index. The upside cap for each fund is determined at the start of each outcome period based on market conditions at the time.

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 that they know where they stand if they do not purchase a fund during its reset.

With a monthly offering, Bond points out that if the market is going up, as long as it makes sense from a tax perspective, each month an investor could step up their position into the fund launching (or resetting) in that month, and start with a fresh upside cap and downside buffer.

Contact Heather Bell at [email protected]

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