With inflation woes, pivoting Fed, recession worries, Buffer ETFs™ provide a case study in risk management across recent Outcome Periods marked by drawdowns in every exposure, asset class in Innovator’s lineup
Sponsor sees record flows and volume as advisors demand effective risk management strategies to buffer market losses by specific amounts
CHICAGO, July 19, 2022 (GLOBE NEWSWIRE) -- Innovator Capital Management, LLC (Innovator or Innovator ETFs) today announced that the recently rebalanced July and Quarterly series of the sponsors’ Defined Outcome ETFs™ with a buffer or floor shielded against losses in their respective reference asset1. The recently ended 12-month annual and 3-month quarterly periods through June were marked by significant drawdowns across core domestic2 and international equity benchmarks as well as bonds, marking a challenging period for balanced portfolios as asset values declined. The range of Buffer ETFs™ and Floor ETFs™ in Innovator’s lineup that reset for July spans large-cap, small-cap and growth in domestic equities; developed and emerging markets stocks internationally; as well as long-term U.S. Treasuries.
The options-based Defined Outcome ETFs™ provide investors with precise buffers against loss and known participation in the upside to a cap over a set amount of time (the outcome period). For a Buffer ETF™ shareholder to benefit from the full extent of a buffer in an outcome period marked by loss in the reference asset, they must hold shares for the full outcome period.
“As the fourth anniversary of the Buffer ETFs™ approaches, this recent outcome period goes to show yet again that our options-based Defined Outcome ETFs™ do just what they say they’re going to do in terms of buffering against market losses. During the market’s ebbs, other risk management strategies, like dynamic or tactical asset allocation switching strategies, low volatility equity or hedge funds prove time and again that they can’t say the same in terms of providing investors with certainty regarding their behavior in relation to the market. With the Defined Outcome ETFs™, before an advisor buys shares, they can know how much buffer or floor against loss they have, what potential upside their clients can achieve, and over what period of time those parameters are in place. We feel that is a very powerful proposition and – with record flows over the past quarter and year-to-date period3 – we think it fair to say that advisors appreciate this type of precise risk management with both the upside participation and the liquidity that Defined Outcome ETFs can offer their clients,” remarked Bruce Bond, Co-Founder and CEO of Innovator ETFs.
The net return of the Innovator U.S. Equity Power Buffer ETF™ – July (ticker: PJUL), which seeks to buffer against the first 15% of losses in the SPDR S&P 500 ETF Trust (SPY) over 12 months, was -.80% over the recently completed outcome period, while SPY returned -11.87% in the period through June.4
Outcome period performance for the Innovator U.S. Equity Power Buffer ETF™ – July (ticker: PJUL) and PJUL’s reference asset, the SPDR S&P 500 ETF Trust (SPY), from 7.01.2021 to 6.30.2022
PJUL incepted 8/7/2018; expense ratio: 0.79%. Performance quoted represents past performance, which is no guarantee of future results. Investment returns and principal value will fluctuate, so you may have a gain or loss when shares are sold. Current performance may be higher or lower than that quoted. For standardized performance and the most recent month-end performance, visit http://www.innovatoretfs.com/pjul. One cannot invest in an index.
The net return of the Innovator Growth-100 Power Buffer ETF – July (NJUL), which seeks to buffer against the first 15% of losses in the Invesco QQQ Trust (QQQ) over a one year period, was -6.76%, versus -20.93% for QQQ in the same 12-month period through June.5
Outcome period performance for the Innovator Growth-100 Power Buffer ETF – July (NJUL) and NJUL’s reference asset, the Invesco QQQ Trust (QQQ), from 7.01.2021 to 6.30.2022
NJUL incepted 6/30/2020; expense ratio: 0.79%. For standardized performance and the most recent month-end performance, visit https://www.innovatoretfs.com/njul.
Comparatively, according to The Wall Street Journal, the average 12-month return through June for 1,342 active domestic equity mutual fund managers was -15.2%6.
“Most risk management is expensive precisely when an investor needs it. But with Buffer ETFs, they give an advisor both the dependable risk management that clients want when it is needed but also typically higher potential upside caps7 during resets that occur in volatile environments. Beyond the capital preservation potential that can help advisors meet their clients’ needs and the health of their own practices, the set outcome periods lend themselves to having productive forward-looking conversations with their clients about risk and financial planning,” added John Southard, Co-Founder and CIO of Innovator ETFs.
Investors can view all the past outcome periods on Innovator’s website using the Previous Outcome Period Tool.
With nearly $1.3 billion in flows over the second quarter, Innovator marked their first billion-dollar quarter for flows ($1.292 billion), besting their previous quarterly flow record, which was attained in the first quarter. This pace made them the fastest growth sub-$10B asset manager of mutual funds and/or ETFs in Q1 per Morningstar Direct data according to The Mutual Fund Wire.com, and also the fastest growing sub $10B 40-act manager through May out of 168 firms with between $1B and $10B. The sponsor continues to set a year-to-date flow record as well. YTD flows through July 1st were $2.231 billion, above any prior first half YTD period and any full year flow figure the sponsor has achieved. The firm was tenth amongst all ETF sponsors in terms of flows in Q2, according to data from Bloomberg LP.
Innovator Defined Outcome ETFs - Benefits to Advisors
- Pioneer and creator of Defined Outcome ETFs™ with 79 ETFs and over $7.3 billion AUM across family8, as well as 4 Managed Outcome ETFs™ with over $180 million in AUM
- Tax-efficient exposure9 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)), as well as the 20+ Year U.S. Treasury Market (TLT); 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 153 outcome period completions with the ETFs successfully resetting for the coming outcome period10
- 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 products11 (e.g., downside buffer levels, upside participation, defined outcome parameters), but with the added benefits of transparency, liquidity, the elimination of credit risk12 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 2017, the firm is 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 the Defined Outcome ETFs™, first-of-their-kind investment 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, Accelerated ETFs™ and Managed Outcome ETFs™. Since the 2018 launch of their flagship Innovator U.S. Equity Buffer ETF™ suite, Innovator’s solutions have helped advisors construct portfolios and manage risk to fit their client’s unique financial needs. 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.
Media Contact
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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.
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™, Accelerated ETF™, Stacker 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 © 2022 Innovator Capital Management, LLC.
800.208.5212
1 Investors can view all the past outcome periods on Innovator’s website using the Previous Outcome Period Tool.
2 The Nasdaq Composite Index’s -29.4% YTD loss and the Russell 2000’s -23.9% YTD loss were the worst first half of the year performance in the history of both indices, while a leading benchmark for large-cap U.S. equities was down the most in any first half since 1970, per Investor’s Business Daily: https://www.investors.com/market-trend/stock-market-today/stocks-remain-negative-nasdaq-on-track-for-record-setting-losses-in-first-half/
3 Innovator ETFs had their first billion-dollar flow quarter ($1.292 billion), topping their prior quarterly record for flows that was hit in Q1. YTD flows through July 1st were $2.231 billion, above any prior YTD period through the first half as well as any full year flow figure.
4 Buffer ETFs™ do not provide dividends. SPY performance is on a price return basis, while PJUL is quoted on a total return basis.
5 Buffer ETFs™ do not provide dividends. QQQ performance is on a price return basis, while NJUL is quoted on a total return basis.
6 The WSJ’s Winners’ Circle survey is a quarterly list looking at outperformance over a rolling 12-month period. In the survey, the Journal identifies mutual fund managers who oversee actively managed U.S.-stock funds with at least three years of performance data and more than $50 million in assets. The survey doesn’t include sector funds, leveraged funds or most quantitative funds. https://www.wsj.com/articles/mutual-funds-managers-positive-returns-11656881703
7 “Cap” refers to the maximum potential return, before fees and expenses and any shareholder transaction fees and any extraordinary expenses, if held over the full Outcome Period. “Buffer” refers to the amount of downside protection the fund seeks to provide, before fees and expenses, over the full Outcome Period. Outcome Period is the intended length of time over which the defined outcomes are sought. Upon fund launch, the Caps can be found on a daily basis via www.innovatoretfs.com
8 ETF count and AUM in all Innovator Defined Outcome ETFs™ as of 7.18.2022, excluding Managed Outcome ETFs™ BUFF, BUFB, BSTP, PSTP.
9 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.
10 As of 7.01.2022
11 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.
12 Defined Outcome ETFs are not backed by the faith and credit of an Issuing institution, so they are not exposed to credit risk.
Photos accompanying this announcement are available at
https://www.globenewswire.com/NewsRoom/AttachmentNg/417853b7-50bb-4e75-ba51-56573d5de2fa
https://www.globenewswire.com/NewsRoom/AttachmentNg/5466d187-1118-4868-bd58-998a0b7c02cf
