Wild New ETF Rides S&P 500, Nasdaq and Russell Gains All at Once
After successfully rolling out exchange-traded funds that mimic structured products, an upstart firm is loading its latest offering with even more bells and whistles.
Innovator ETFs plans to list three funds that offer exposure to multiple equity indexes on the upside, while tracking a single gauge on the way down, according to a release. All three deliver returns up to a cap, but just to add to the complexity, one throws in protection against the first 9% of losses, too.
While complicated products have often struggled to find buyers in the $4.8 trillion U.S. ETF market, Illinois-based Innovator has had more success than most. The firm, co-founded by ex-PowerShares executive Bruce Bond, has attracted more than $3 billion to its so-called defined outcome ETFs, which use options to deliver structured note-like returns.
A roller-coaster year for the stock market has helped, and it’s possible investors will stomach the added intricacy of the new products if it means they can ride the rally without getting hurt too badly.
“It’s emblematic of the times,” said Nicholas Colas, co-founder of DataTrek Research. “It’s the kind of product that comes along when there has been a lot of equity returns already in the market and investors are worried they have missed the big move.”
The three new funds will list on October 1 and charge a 0.79% management fee. They’ll rebalance annually, which makes them suitable for longer-term investors, according to a statement from the company.