'Accelerated’ ETFs Will Double Benchmark Gains, Cap Losses

The firm behind a growing set of exchange-traded funds that cushion losses is offering a new suite of tools for bulls to bet on another stock surge.

Innovator Capital Management will launch four accelerated ETFs on April 1, which will double the gains of the benchmark they track up to a predetermined limit, but only provide a single exposure to the benchmark on the way down.

Unlike traditional leveraged ETFs that are designed as short-term trading vehicles, the Innovator funds may be more suited for long-term investments, since they’re magnified on the upside only and re-balance annually or quarterly. These funds join the firm’s other defined-outcome ETFs, which use options to mimic structured products and currently have about $4 billion in assets.

“With valuations elevated, Wall Street strategists are near unanimously forecasting a low to moderate growth environment for domestic large-cap equities in the mid- to long-term,” John Southard, chief investment officer of Innovator ETFs, said in a statement. The new funds “seek to provide the potential to enhance returns in such challenging environments.”

The Innovator U.S. Equity Double Accelerated Return ETF (XDAP) will offer twice the gains of the SPDR S&P 500 ETF Trust (SPY), with single SPY downside exposure over 12 months. Total gains will be capped at about 19.6%, according to estimates from the firm.

Two other new ETFs will also double SPY gains, with one offering a buffer against the first 9% of SPY losses in a year and gains capped at about 11.5%. The other provides a single exposure to SPY on the downside over three months and caps the upside at about 8.1%.