Each calendar quarter, BALT targets a 20% Buffer against SPY losses and the upside performance of SPY, to a cap1
The Buffer and Cap automatically reset quarterly and the ETF runs indefinitely
Constructed as a defensive portfolio holding with the goal of providing an alternative to short term debt and core bond allocations
Innovator believes BALT may help investors avoid the impact of interest rate risk and duration in bonds
CHICAGO, July 01, 2021 (GLOBE NEWSWIRE) — Innovator Capital Management, LLC (Innovator) today announced the launch of the Innovator Defined Wealth Shield ETF (BALT). Listing on the Cboe today, BALT will use options on SPY (SPDR S&P 500 ETF Trust) in seeking to provide exposure to the equity market, to a cap, while targeting a significant buffer against losses in SPY each calendar quarter. BALT provides investment returns by allowing investors to participate in the upside of the equity markets with a significant buffer against losses, but it does not provide fixed income typical of bonds. The Innovator Defined Wealth Shield ETF seeks to offer advisors a defensive investment strategy that is intended as an alternative to cash, short-term debt, and core bond strategies that are common in traditional portfolio construction and conservative allocations.
Return profile for the Innovator Defined Wealth Shield ETF, as of 7/01/21
|BALT||Innovator Defined Wealth Shield ETF||20.00% / Qtr||0.70% / Qtr||3 months
7/01/21 – 9/30/21
** Although the ETF targets a 20% buffer, the buffer may fall into a range of 15% to 20%; there is no guarantee that the buffer will be within this range or that the Fund will provide the buffer. The Upside Cap above is shown gross of the .175% quarterly (0.69% annual) management fee for BALT. “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 commencement of the Outcome Period, the remaining Cap and/or Buffer can be found on a daily basis via www.innovatoretfs.com.
With bond yields near historic lows and money market funds yielding less than .1%2 while duration3 is extended and interest rate risk elevated4, Innovator thinks that BALT – with its measured quarterly upside potential to SPY – could be a compelling alternative to short-term treasuries, bond funds and cash on the sidelines for advisors looking to sidestep the negative portfolio impacts offered by the current low rate yield environment.
“Many advisors I talk to today have deep concerns when it comes to bonds. They know bonds come with low yields and historically high interest rate risk but they don’t know of reasonable alternatives for their clients. That is precisely why we created BALT. We think BALT can help investors diversify their defensive allocations by working to reduce interest rate risk while maintaining a defensive, risk managed posture towards equities,” said Bruce Bond, CEO of Innovator ETFs. “We are excited to bring this product to market and continue innovating on the behalf of advisors and their clients.”
“While the economy is opening up and people are starting to safely get back to normal, we think advisors are starting to realize there is a different kind of pandemic in fixed income markets, and they are feeling the symptoms as they attempt to construct conservative portfolios for risk averse clients, especially those nearing retirement or in the deaccumulation5 phase,” said John Southard, CIO of Innovator ETFs. “With historically low yields and real rates deeply negative, while duration remains extremely extended and strong inflationary pressures that are debatably ‘transitory’ abound, we think it’s going to be more difficult for advisors to effectively construct defensive portfolios with traditional allocations to cash, short-term treasuries and core bond funds. Troubling dynamics with inflation, debt issuance and deficits all boil down to significant potential pressures on rates, negative real returns for cash and short-term bond strategies as well as principal losses for bond funds. In this environment, we think many advisors are looking for potential alternatives to their bond allocations and new solutions that can diversify the return sources within the defensive portions of their portfolios while maintaining risk management features – and we think BALT, the Innovator Defined Wealth Shield ETF, can help.”
Investing in BALT involves risk, and does not provide investment income. The BALT ETF is not a money market fund. The BALT ETF seeks to provide a large buffer (15-20% on a quarterly basis) against loss, with a defined upside cap before fees and expenses, benchmarked to the price return of SPY. As a result, the fund does not provide investment income. A money market fund is a kind of mutual fund that invests in highly liquid, near-term instruments. These instruments include cash, cash equivalent securities, and high-credit-rating, debt-based securities with a short-term maturity (such as U.S. Treasuries).
Buffer: The Innovator Defined Wealth Shield ETF will target a buffer against the first 20% of losses in SPY over each quarterly outcome period. The buffer will be determined at the start of each quarterly outcome period. Depending on market dynamics ahead of an outcome period, the buffer for that applicable quarter will target 20% but will generally seek to be within a range of 15% to 20% against losses of SPY. If SPY (the reference asset), exceeds the buffer level that is determined at the beginning of the outcome period, investors holding shares since the outcome period began will absorb losses beyond the buffer level.
Innovator’s research shows that for the 761 3-month rolling periods between 1958 and May 2021, with a 20% buffer, you would have been positive or neutral in 98.8% of those periods. In the periods exceeding 20%, the average loss was approximately 4%.
Index: BALT’s investment strategy will be patterned on the MerQube US Equity Protection Index from next-generation index provider MerQube, whose research Innovator has licensed.
FLEX Options: BALT will be constructed using layers of Cboe FLEX Options on SPY, offering exposure to U.S. large-cap stocks rather than investing in them directly. Investors in BALT will not receive dividend yield from their holdings; the ETF’s performance will be based on the price returns of the reference ETF (SPY) over the length of the outcome period.
Fees: The Innovator Defined Wealth Shield ETF will charge a 0.69% management fee.
Interim Period Behavior: The Innovator Defined Wealth Shield ETF will seek to provide defined returns over the entire outcome period, not on a daily basis. As a result, interim returns will lag the reference benchmark ETF and can and will likely be negative should the reference asset trade within the targeted buffer zone over the course of the outcome period. This is due to the time-value nature of the underlying options held by the fund; as such, BALT won’t maintain a proportional beta of 1.0 to the reference ETF; Innovator Defined Wealth Shield ETF will likely lag the equity benchmark on the way up or down. Should the reference asset finish the quarterly outcome period within the targeted buffer zone, BALT should end with a return of zero, gross of fees and expenses.
An investor that purchases BALT shares after an outcome period has begun may be exposed to downside from that point forward if the reference asset has appreciated in value since the period began and finishes the period in the targeted buffer zone, or if an investor sells before an outcome period ends and the ETF has declined in value since purchase.
Tax Efficiency: Using the creation redemption mechanism, Innovator intends BALT to be tax efficient6, with taxable events foreseen only in the event of the sale of shares by an investor. As such, BALT can be considered a long-term, core holding within a defensive portfolio allocation.
The Defined Wealth Shield ETF is part of Innovator’s category-creating Defined Outcome ETF™ family – including the Buffer ETFs™, the first group of ETFs designed to provide investors with built-in buffers against losses of -9% (“Buffer”), -15% (“Power Buffer”) or -30% (“Ultra Buffer”) and exposure to the growth of core markets, to a cap, in a tax-efficient vehicle over a one-year outcome period. Innovator currently has 70 Defined Outcome ETFs™ in the market, including the Innovator Laddered Fund of S&P 500 Power Buffer ETFs (BUFF), with total assets under management (AUM) over $4.7 billion7. In addition to being named “ETF Issuer of the Year – 2019” in the seventh annual ETF.com Awards*, acknowledging the rapid advisor adoption and the positive potential impact on investor behavior of the Defined Outcome ETFs™, Innovator defended their 2019 win for the “Asset Managers: ETFs” award at the 2020 WealthManagement.com Industry Awards and was “Highly Commended” for “ETF Suite of the Year” at the Mutual Fund Industry and ETF Awards 2020 by Fund Intelligence**.
Innovator Defined Outcome ETFs – Benefits to Advisors
- Pioneer and creator of Defined Outcome ETFs™ with 70 ETFs and greater than $4.7 billion AUM across family8
- Tax-efficient exposure9 to five broad equity benchmarks (S&P 500, NASDAQ-100, Russell 2000, MSCI EAFE, MSCI EM), the 20+ Year U.S. Treasury Market and now including 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 S&P 500 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.
- Over 72 Defined Outcome ETFs™ from Innovator have reset and successfully completed their respective outcome periods10
- Monthly issuance on SPY or the S&P 500 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.
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™, Floor ETFs™, Stacker ETFs™ and Accelerated ETFs™.
The Buffer ETFs™ seek to provide the upside performance of broadly recognized benchmarks (e.g., S&P 500, NASDAQ-100, Russell 2000, MSCI EAFE, and MSCI Emerging Markets, as well as the iShares 20+ Year Treasury Bond ETF (TLT)), or underlying ETFs based on those benchmarks, as applicable, 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 S&P 500 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 risk and lower costs afforded by the ETF structure.***
Buffer ETFs seek to provide investors with potential market appreciation of a given reference asset, up to a cap, and a predetermined downside buffer, based on the price returns of the reference asset, over a 1 year outcome period.
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™, Stacker ETFs™ and Floor 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. Stacker ETFs™ are the world’s first ETFs to offer a multiple or “stacked” exposure to two or three benchmark index ETFs (SPY, QQQ, IWM) to a cap, with only downside exposure to the SPY over a one-year outcome period. Having launched the first Defined Outcome ETFs™ in 2018 — the flagship Innovator S&P 500 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 (Cboe: CBOE) 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 over $143 billion in global assets as of June 30, 2020. Milliman FRM is one of the largest and fastest-growing subadvisors of ETFs. For more information about Milliman FRM, visit Milliman.com/FRM.
MerQube is an innovative index provider offering design and calculation solutions for the financial and insurance industries. Launched in 2019 in New York by a team composed of index industry veterans and technology experts, MerQube was created as a technology-driven alternative to existing providers. It designs and /or calculates a wide variety of indices, ranging from thematic to ESG, factor and retirement ones, while covering multi-asset, equities, futures as well as options. For more information, please visit https://merqube.com/
+1 (802) 999-5526
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.
While the Fund will not participate in any QQQ or IWM ETF losses, as applicable, over the duration of the Outcome Period as whole, a decrease in the value in the net performance of the underlying assets’ share price will cause a decrease in the Fund’s NAV while an Outcome Period is ongoing. In the event an Outcome Period has begun and the underlying asset’s share price has increased in value, such an increase will be reflected in the value of the Fund’s purchased call option on the underlying assets. Accordingly, in the event that the underlying asset’s share price were to subsequently decrease in value, that decrease would also be reflected in the value of that option, and therefore the Fund’s NAV. An investor that purchases Fund Shares after the underlying assets have increased in value during an Outcome Period may be negatively affected by future decreases during the remainder of the Outcome Period
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 detailed 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.
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 these funds’ investment objectives. Initial outcome periods are approximately 1-year beginning on the funds’ inception dates. 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 as information relating to the potential outcomes of an investment in a Fund on a daily basis.
The Defined Outcome Funds that include a buffer objective 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.
Nasdaq® is a registered trademark of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and is licensed for use by Innovator Capital Management, LLC. The Product(s) have not been passed on by the Corporations as to their legality or suitability. The Product(s) are not issued, endorsed, sold, or promoted by the Corporations.
THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).
The Innovator Russell 2000 Power Buffer ETF™ (the “Fund”) has been developed solely by Innovator Capital Management, LLC. The “Fund” is not in any way connected to or sponsored, endorsed, sold or promoted by the London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). FTSE Russell is a trading name of certain of the LSE Group companies. All rights in the Russell 2000 Index (the “Index”) vest in the relevant LSE Group company, which owns the Index. “FTSE®” “Russell®”, and “FTSE Russell®” are trade marks of the relevant LSE Group company and are used by any other LSE Group company under license.
The Index is calculated by or on behalf of FTSE International Limited or its affiliate, agent or partner. The LSE Group does not accept any liability whatsoever to any person arising out of (a) the use of, reliance on or any error in the Index or (b) investment in or operation of the Fund. The LSE Group makes no claim, prediction, warranty or representation either as to the results to be obtained from the Fund or the suitability of the Index for the purpose to which it is being put by Innovator Capital Management, LLC.
The ETFs referred to herein is not sponsored, endorsed, or promoted by MSCI Inc. or based upon the MSCI EAFE and MSCI Emerging Markets Indexes. MSCI Inc. bears no liability with respect to the ETFs.
MSCI, MSCI EAFE, and MSCI Emerging Markets are trademarks or service marks of MSCI Inc. or its affiliates (“Marks”) and are used hereto subject to license from MSCI. All goodwill and use of Marks inures to the benefit of MSCI and its affiliates. No other use of the Marks is permitted without a license from MSCI.
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.
** The shortlists and winners are comprised of individuals and firms who have submitted entries or been nominated via the online submission process, as well as through recommendations from leading market participants. Judges will judge the ETF categories and will use the submitted application material, as well as any uploaded supplemental information, to determine which firm, individual or product they believe to be the most suitable and deserving winners for each category.
*** 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. Defined Outcome ETFs are not backed by the faith and credit of an issuing institution, so they are not exposed to credit risk.
Innovator ETFsTM, Defined Outcome ETFTM, Buffer ETFTM, Stacker ETFTM, Accelerated ETFs™, Enhanced ETFTM, Define Your FutureTM, Leading the Defined Outcome ETF RevolutionTM 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 © 2021 Innovator Capital Management, LLC.
1 In seeking to provide a significant measure of downside protection on a quarterly basis, the options-based strategy underpinning BALT will likely offer investors an upside cap that is substantially lower than equity Buffer ETFs™ that operate over an annual outcome period.
2 Source: Bloomberg LP as of 6/28/2021.
3 Duration is a measure of interest rate risk, how much the prices of bonds are likely to shift if interest rates change.
4 Interest rate risk is measured by duration, a measure of the sensitivity of the price of a bond or other debt instrument to a change in interest rates. In general, the higher the duration, the more a bond’s price will drop as interest rates rise.
5 Typical of retirees, the deaccumulation phase is the period of an investor’s life when they are drawing down on the assets they have spent their working life acquiring and investing. The accumulation phase precedes the deaccumulation phase; it is when an investor is saving and investing for retirement.
6 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.
7 AUM as of 6.30.2021.
8 AUM in all Innovator Defined Outcome ETFs as of 6.30.2021.
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 7.01.2021
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.