Managed Outcome ETFs™ provide advisors single ticker managed portfolios to streamline Defined Outcome ETF™ investing
Innovator Laddered Allocation Buffer ETF (BUFB) – Risk management growth engine built with an equal weight portfolio of 12 monthly U.S. Equity Buffer ETFs™ set to list February 9th
BUFF – the original Managed Outcome ETF™ – to reduce fee, change name to Innovator Laddered Allocation Power Buffer ETF on February 9th
CHICAGO, Feb. 08, 2023 (GLOBE NEWSWIRE) — Innovator Capital Management, LLC (Innovator) the pioneer and leader of Defined Outcome ETFs™, today announced the planned launch of the Innovator Laddered Allocation Buffer ETF™ (BUFB) tomorrow, Wednesday, February 9th, 2023 on the Cboe. BUFB will allocate equally to each of Innovator’s 12 monthly U.S. Equity Buffer ETFs™ and rebalance semi-annually. The underlying U.S. Equity Buffer ETFs™ each seek to provide a buffer against the first 9% of losses in the SPDR S&P 500 ETF Trust (SPY) and upside performance to a cap over a one-year outcome period. The laddered approach to BUFB means that the underlying U.S. Equity Buffer ETFs™ have outcome periods ranging from less than one-month to one-year. Each month, one U.S. Equity Buffer ETF™ concludes its one-year outcome period and resets its options on SPY for the coming year. BUFB’s managed strategy can provide advisors and money managers an efficient way to incorporate the benefits of Buffer ETFs™ – risk management with upside exposure to equities – into balanced portfolios, retirement accounts, target-date funds and model portfolios.
“The Innovator Laddered Allocation Buffer ETF™ (BUFB) will seek to allow advisors to own the market with built in buffers but without the need to evaluate the parameters of each monthly series. BUFB can help smooth out the equity investing experience by investing in Buffer ETFs™ that historically have shown lower volatility1, beta2 and drawdowns relative to SPY – the main benchmark for U.S. stocks – yet still participate in a healthy amount of the upside that equities can provide over time. There are many portfolio applications for this new ETF, and we’re excited to have it joining BUFF as potential solutions during a confusing market environment that is challenging both sides of a traditional balanced portfolio. These ETFs can potentially smooth out the equity investing experience and reduce the effects of severe market downturns, something that is so important for pre-retirees and retirees who are sensitive to sequence of returns risk,” said Bruce Bond, CEO of Innovator ETFs.
Managed Outcome ETFs™
The launch of BUFB represents the buildout of Innovator’s Managed Outcome ETF™ lineup. The funds within the Managed Outcome ETF™ suite seek to provide investors with professionally managed, tax-efficient and diversified portfolios based on Innovator’s industry-leading family of Defined Outcome ETFs™.
With 80 Defined Outcome ETFs™, including the flagship suite of U.S. Equity Buffer ETFs™, Innovator has laid the groundwork for a range of managed strategies that seek to simplify and streamline the defined outcome investing process for advisors looking to allocate to solutions at any point in time.
Bond continued, “With the Managed Outcome ETFs™ suite, Innovator is focused on bringing investors a seamless, packaged way to invest in Defined Outcome strategies. The Laddered Allocation Buffer ETF™ will join BUFF – our original fund of Buffer ETFs™ that uses a laddered allocation approach – in offering investors the ability to plug-and-play these potential solutions into portfolios. But we’re just getting started with this group of products. We see more concepts to bring in the Managed Outcome ETF™ suite that will leverage our expertise in Defined Outcome investing for the benefit of investors and their advisors, and we’re looking forward to growing this exciting lineup.”
BUFF: Name Change (Innovator Laddered Allocation Power Buffer ETF™) and Fee Reduction
Innovator also announced planned changes to its BUFF ETF, comprised of an equal-weight allocation to each of the 12 Innovator U.S. Equity Power Buffer ETFs that seek to provide the upside of Large-cap U.S. stocks, subject to caps, while buffering against the first 15% of U.S. equity losses.
BUFF became the first fund of Buffer ETFs™ composed of twelve monthly underlying Buffer ETFs on Large-cap U.S. stocks when it was converted from a previous strategy in August 2020.
Currently named the Innovator Laddered Fund of U.S. Equity Power Buffer ETFs™, on Wednesday, February 9th, BUFF will change its name to the Innovator Laddered Allocation Power Buffer ETF™.
Additionally, BUFF’s total expense ratio will be reduced by 10 basis points from .99% to .89% of the Fund’s average daily net assets3. This total expense ratio includes the fees for the underlying Buffer ETFs™, which are all 79 basis points. This name change and reduction in the annual unitary management fee paid by shareholders to Innovator Capital Management, LLC the Fund’s investment adviser, was recently approved by the Board of Trustees of the Innovator ETFs Trust.
BUFB – Innovator Laddered Allocation Buffer ETF™
BUFB will seek to offer investors a managed portfolio (an ETF of ETFs) that will invest equally across all twelve monthly U.S. Equity Buffer ETFs™ – providing a ladder of buffered exposures to SPY. The twelve underlying buffered SPY exposures each have a different upside cap level and period of time until their annual reset, but share a 9% buffer against losses in SPY over their outcome period. Innovator’s intention with BUFB is to provide investors a managed approach to Buffer ETF™ investing that maintains upside growth potential by continuously participating in new upside caps as the underlying ETFs reset monthly – and which can be allocated to at any point during the year.
BUFB will be rebalanced semi-annually, charge a total expense ratio of .89%4 and seeks to provide investors with a simplified, efficient solution to buffered equity investing. It is anticipated the ETF will provide investors with lower volatility (standard deviation)5, beta6 and drawdowns relative to SPY while capturing a measure of the capital appreciation potential of U.S. domestic large-cap stocks, the largest equity market globally by capitalization and typically the most significant allocation in most diversified portfolios.
As an ETF of ETFs, BUFB is designed to be bought and/or sold without regard for the outcome period associated with the underlying individual ETFs. The strategy, as measured by its index – the MerQube US Large Cap Equity Buffer Laddered Index (MQUS9BLF) – seeks to provide lower volatility (standard deviation), beta and drawdowns relative to SPY. While BUFB will invest in Innovator Defined Outcome Buffer ETFs™ – in an equal weighted portfolio of all twelve monthly issues of the U.S. Equity Buffer ETFs™, which have a 9% buffer against loss in the S&P 500 – the Fund will not be a Defined Outcome product with an upside cap and downside buffer, nor an outcome period.
BUFB will seek investment results that correspond generally (before fees and expenses) to the price and yield of the MerQube US Large Cap Equity Buffer Laddered Index. BUFB will generally invest at least 80% of its net assets (including investment borrowings) in securities comprising this Index. The Index has been developed by and is maintained and sponsored by MerQube. The Index is comprised of the shares of the following twelve underlying Innovator U.S. Equity Buffer ETFs™:
- Innovator U.S. Equity Buffer ETF – January (BJAN)
- Innovator U.S. Equity Buffer ETF – February (BFEB)
- Innovator U.S. Equity Buffer ETF – March (BMAR)
- Innovator U.S. Equity Buffer ETF – April (BAPR)
- Innovator U.S. Equity Buffer ETF – May (BMAY)
- Innovator U.S. Equity Buffer ETF – June (BJUN)
- Innovator U.S. Equity Buffer ETF – July (BJUL)
- Innovator U.S. Equity Buffer ETF – August (BAUG)
- Innovator U.S. Equity Buffer ETF – September (BSEP)
- Innovator U.S. Equity Buffer ETF – October (BOCT)
- Innovator U.S. Equity Buffer ETF – November (BNOV)
- Innovator U.S. Equity Buffer ETF – December (BDEC)
BUFB’s investment performance, tracking its Index, will largely depend on the investment performance of the underlying ETFs in which the Fund invests, subject to the respective caps and buffers of the underlying ETFs. There is no guarantee the underlying funds will achieve their investment objectives.
The Fund is a “fund-of-funds” and does not itself pursue a defined outcome strategy, nor does it seek to provide a buffer against reference asset losses.
Innovator Defined Outcome ETFs – Benefits to Advisors
- Pioneer and creator of Defined Outcome ETFs™ with 80 ETFs and over $5.7 billion AUM across family7
- Tax-efficient exposure8 to five broad equity benchmarks with buffers against loss (Large-cap U.S. Equity (SPY), Growth (QQQ), Small-Cap U.S. Equity (IWM), International Developed (EFA), Emerging Markets (EEM)) the 20+ Year U.S. Treasury Market (TLT); the Stacker ETFs, the world’s first ETFs to offer a “stacked” exposure to two or three benchmark equity index ETFs on the upside, to a cap, with downside exposure to the SPY only; and the 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
- Reset annually or quarterly and can be held indefinitely as core holdings
- Innovator’s Defined Outcome ETF™ lineup has amassed 113 outcome period completions with the ETFs successfully resetting for the coming outcome period9
- Monthly issuance on SPY with three buffer levels (9,15, or 30%)
Innovator’s Defined Outcome ETFs™ are the subject of a patent application filed with the U.S. Patent and Trademark Office.
The Funds have characteristics unlike many other traditional investment products and may not be suitable for all investors. For more information regarding whether an investment in the Fund is right for you, please see “Investor Suitability” in the prospectus.
About Innovator Defined Outcome ETFs™
Defined Outcome ETFs™ are the world’s first ETFs that seek to provide investors with known ranges of future investment outcomes prior to investing. These outcome ranges include multiple and single upside exposure, to a cap, with defined levels of downside risk with buffers and floors over a set amount of time. The Innovator Defined Outcome ETFs™ cover a large spectrum of domestic and international equities and bonds. Innovator’s category-creating Defined Outcome ETF™ family includes Buffer ETFs™, Stacker ETFs™ and Floor ETFs™.
The Buffer ETFs™ seek to provide the upside performance of broadly recognized benchmarks (e.g., SPY, QQQ, IWM, EFA, and EEM, as well as TLT) to a cap, with built-in buffers, over an outcome period of one year. The ETFs reset annually and can be held indefinitely.
Each Buffer ETF™ in Innovator’s Defined Outcome ETF™ suite seeks to provide a defined exposure to a broad market benchmark where the downside buffer level, upside growth potential to a cap, and Outcome Period are all known, prior to investing. In 2019, Innovator began expanding its suite of U.S. Equity Buffer ETFs™ into a monthly series to provide investors more opportunities to purchase shares as close to the beginning of their respective Outcome Periods as possible.
Investors can purchase shares of a previously listed Defined Outcome ETF™ throughout the entire Outcome Period, obtaining a current set of defined outcome parameters, which are disclosed daily through a web tool available at: http://innovatoretfs.com/define.
Innovator is focused on delivering defined outcome-based solutions inside the benefit-rich ETF wrapper, retaining many of the features that have contributed to the success of structured products10 (e.g., downside buffer levels, upside participation, defined outcome parameters), but with the added benefits of transparency, liquidity, the elimination of credit risk11 and lower costs afforded by the ETF structure.
About Innovator Capital Management, LLC
Awarded ETF.com’s “ETF Issuer of the Year – 2019″*, Innovator Capital Management LLC (Innovator) is an SEC-registered investment advisor (RIA) based in Wheaton, IL. Formed in 2014, the firm is currently headed by ETF visionaries Bruce Bond and John Southard, founders of one of the largest ETF providers in the world. Bond and Southard reentered the asset management industry to bring to market first-of-their-kind investment opportunities, including the Defined Outcome ETFs™, products that they felt would change the investing landscape and bring more certainty to the financial planning process. Innovator’s category-creating Defined Outcome ETF™ family includes Buffer ETFs™, Floor ETFs, Stacker ETFs™ and the Accelerated ETFs™. Buffer ETFs™ and Floor ETFs™ seek to provide investors structured exposures to broad markets, where the upside growth potential, buffer or floor against the downside, and outcome period are all known, prior to investing. Accelerated ETFs™ are 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 over an outcome period. Having launched the first Defined Outcome ETFs™ in 2018 — the flagship Innovator U.S. Equity Buffer ETF™ Suite – Innovator’s solutions allow advisors to construct diversified portfolios with known outcome ranges to aid in risk management and financial planning. Built on a foundation of innovation and driven by a commitment to help investors better control their financial outcomes, Innovator is leading the Defined Outcome ETF Revolution™. For additional information, visit www.innovatoretfs.com.
About Cboe Global Markets, Inc.
Cboe Global Markets is one of the world’s largest exchange-holding companies, offering cutting-edge trading and investment solutions to investors around the world. For more information, visit www.cboe.com.
About Milliman Financial Risk Management LLC
Milliman Financial Risk Management LLC (Milliman FRM) is a global leader in financial risk management to the retirement industry, providing investment advisory, hedging, and consulting services on approximately $173.5 billion in global assets as of September 30, 2023. Milliman FRM is one of the largest and fastest-growing subadvisors of ETFs. For more information about Milliman FRM, visit www.Milliman.com/FRM.
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Interim Period Shareholders
Unlike structured notes, which offer limited liquidity, Innovator Defined Outcome ETFs™ trade throughout the day on an exchange, like a stock. As a result, investors purchasing shares of a Fund after its launch date may achieve a different payoff profile than those who entered the Fund on day one. Innovator recognizes this as a benefit of the Funds and provides a web-based tool that allows investors to know, in real-time throughout the trading day, their potential defined outcome return profile before they invest, based on the current ETF price and the Outcome Period remaining. Innovator’s web tool can be accessed at http://www.innovatoretfs.com/define.
The Fund is a “fund-of-funds” and does not itself pursue a defined outcome strategy, nor does it seek to provide a buffer against reference asset losses. Depending upon prevailing market conditions, an investor purchasing Shares of the Fund may experience investment returns that underperform the investment returns provided by the Underlying ETFs themselves because one or more Underlying ETFs may have exhausted the buffer that it seeks to provide or have little upside available due to the reference asset return being close to or exceeding to its Cap. Additionally, as a shareholder in other ETFs, the Fund bears its proportionate share of each ETF’s expenses, subjecting Fund shareholders to duplicative expenses.
Although each Fund seeks to achieve the defined outcomes stated in its investment objective, there is no guarantee that it will do so. The returns that the Funds seek to provide do not include the costs associated with purchasing shares of the Fund and certain expenses incurred by the Fund.
Investing involves risks. Loss of principal is possible. The Funds face numerous market trading risks, including active markets risk, authorized participation concentration risk, buffered loss risk, cap change risk, capped upside return risk, correlation risk, liquidity risk, management risk, market maker risk, market risk, non-diversification risk, operation risk, options risk, trading issues risk, upside participation risk and valuation risk. For a detail list of fund risks see the prospectus.
Market Disruptions Resulting from COVID-19. The outbreak of COVID-19 has negatively affected the worldwide economy, individual countries, individual companies and the market in general. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund.
Foreign and Emerging Markets Risk. Non-U.S. securities and Emerging Markets are subject to higher volatility than securities of domestic issuers due to possible adverse political, social or economic developments, restrictions on foreign investment or exchange of securities, lack of liquidity, currency exchange rates, excessive taxation, government seizure of assets, different legal or accounting standards, and less government supervision and regulation of securities exchanges in foreign countries.
Technology Sector Risk. Companies in the technology sector are often smaller and can be characterized by relatively higher volatility in price performance when compared to other economic sectors. They can face intense competition, which may have an adverse effect on profit margins.
Small-Cap Risk. Small-cap companies may be more volatile and susceptible to adverse developments than their mid- and large-cap counterpart. In addition, the small-cap companies may be less liquid than larger companies.
FLEX Options Risk. The Fund will utilize FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (OCC). In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement obligations, the Fund could suffer significant losses. Additionally, FLEX Options may be less liquid than standard options. In a less liquid market for the FLEX Options, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. The values of FLEX Options do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of reference asset.
These Funds are designed to provide point-to-point exposure to the price return of the Reference Asset via a basket of Flex Options. As a result, the ETFs are not expected to move directly in line with the Reference Asset during the interim period.
Investors purchasing shares after an outcome period has begun may experience very different results than funds’ investment objective. Initial outcome periods are approximately 1-year beginning on the funds’ inception date. Following the initial outcome period, each subsequent outcome period will begin on the first day of the month the fund was incepted. After the conclusion of an outcome period, another will begin.
Fund shareholders are subject to an upside return cap (the “Cap”) that represents the maximum percentage return an investor can achieve from an investment in the funds’ for the Outcome Period, before fees and expenses. If the Outcome Period has begun and the Fund has increased in value to a level near to the Cap, an investor purchasing at that price has little or no ability to achieve gains but remains vulnerable to downside risks. Additionally, the Cap may rise or fall from one Outcome Period to the next. The Cap, and the Fund’s position relative to it, should be considered before investing in the Fund. The Funds’ website, www.innovatoretfs.com, provides important Fund information as well information relating to the potential outcomes of an investment in a Fund on a daily basis.
The Funds with buffer mechanisms only seek to provide shareholders that hold shares for the entire Outcome Period with their respective buffer level against Reference Asset losses during the Outcome Period. You will bear all Reference Asset losses exceeding 9, 15 or 30%. Depending upon market conditions at the time of purchase, a shareholder that purchases shares after the Outcome Period has begun may also lose their entire investment. For instance, if the Outcome Period has begun and the Fund has decreased in value beyond the pre-determined buffer, an investor purchasing shares at that price may not benefit from the buffer. Similarly, if the Outcome Period has begun and the Fund has increased in value, an investor purchasing shares at that price may not benefit from the buffer until the Fund’s value has decreased to its value at the commencement of the Outcome Period.
THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).
Cboe Global Markets, Inc., and its affiliates do not recommend or make any representation as to possible Benefits from any securities, futures or investments, or third-party products or services. Cboe Global Markets, Inc., is not affiliated with S&P DJI, Milliman, or Innovator Capital Management. Investors should undertake their own due diligence regarding their securities, futures and investment practices.
Cboe Global Markets, Inc., and its affiliates make no warranty, expressed or implied, including, without limitation, any warranties as of merchantability, fitness for a particular purpose, accuracy, completeness or timeliness, or as to the results to be obtained by recipients of the products.
* ETF.com’s editorial team chose the finalists and then the ETF.com Awards Selection Committee, an independent panel comprised of fifteen of the ETF industry’s leading analysts, consultants and investors, decided the winners.
Innovator ETFs™, Defined Outcome ETF™, Buffer ETF™, Enhanced ETF™, Define Your Future™, Leading the Defined Outcome ETF Revolution™ and other service marks and trademarks related to these marks are the exclusive property of Innovator Capital Management, LLC.
The Funds’ investment objectives, risks, charges and expenses should be considered before investing. The prospectus contains this and other important information, and it may be obtained at innovatoretfs.com. Read it carefully before investing.
Innovator ETFs are distributed by Foreside Fund Services, LLC.
Copyright © 2023 Innovator Capital Management, LLC.
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1 Volatility is a statistical measure of the dispersion of returns for a given security or market index.
2 Beta is a measure of the volatility of an individual stock in comparison to the unsystematic risk of the entire market.
3 BUFF’s investment advisor, Innovator Capital Management, LLC, has agreed to waive management fees of .10% of average daily net assets until June 30, 2024. The waiver may be terminated by action of the Board of Trustees of the Trust at any time upon 60 days’ written notice by the Trust, on behalf of the Fund or by the Fund’s investment advisor on or after June 30, 2024.
4 BUFB will charge 0.10% of invested assets after assumed expenses of the underlying funds, which all currently have a management fee of 0.79% of invested assets (a total expense ratio of .89%). While BUFB has an approved management fee of .20%, the Fund’s investment advisor, Innovator Capital Management, LLC, has agreed to waive management fees of .10% of average daily net assets until June 30, 2024. The waiver may be terminated by action of the Board of Trustees of the Trust at any time upon 60 days’ written notice by the Trust, on behalf of the Fund or by the Fund’s investment advisor on or after June 30, 2024.
5 Volatility is a statistical measure of the dispersion of returns for a given security or market index.
6 Beta is a measure of the volatility of an individual stock in comparison to the unsystematic risk of the entire market.
7 AUM in all Innovator Defined Outcome ETFs as of 2.04.2022.
8 ETFs use creation units, which allow for the purchase and sale of assets in the fund collectively. Consequently, ETFs usually generate fewer capital gain distributions overall, which can make them somewhat more tax-efficient than mutual funds.
9 As of 2.01.2022
10 Structured notes and structured annuities are financial instruments designed and created to afford investors exposure to an underlying asset through a derivative contract. It is important to note that these ETFs are not structured notes or structured annuities.
11 Defined Outcome ETFs are not backed by the faith and credit of an Issuing institution, so they are not exposed to credit risk.
