Innovator ETFs to introduce defined outcome Stacker ETFs
Innovator Capital Management is planning to launch the Innovator Stacker ETFs, the world’s first ETFs to offer a “stacked” or multiple exposure on the upside, to a cap, with a single exposure to the downside.
Part of Innovator’s Defined Outcome ETF family, the Stacker ETFs will offer advisors a potential solution to magnify their equity exposures and performance potential by accessing multiple US stock market return streams simultaneously, up to a cap, while maintaining downside exposure to a single benchmark, SPY (the SPDR S&P 500 Index ETF), over a one year outcome period.
The Stackers ETFs will not be like traditional leveraged ETFs, which can produce distorted returns and higher volatility when held long-term due to their frequent, often daily, rebalancing. Instead, the Stacker ETFs™ will seek to provide asymmetrical returns over a year-long outcome period that are magnified on the upside only, to a cap, while rebalancing annually, making them more suited for longer-term investors.
“We are very excited to introduce the Stacker ETFs™. We have been working diligently on this product concept for over three years. Now, for the first time in an ETF, investors who hold shares for an entire outcome period have access to triple or double exposures on the potential upside to a cap with a single exposure on the downside, the S&P 500. The Stacker ETFs seek to provide advisors with diversified exposure across the US stock markets and can magnify investors’ performance potential without increasing risk beyond exposure to the S&P 500, the benchmark many clients are most comfortable with. It has been an honour for us to witness the growth of the Innovator Buffer ETFs and we believe the ‘Stackers’ will be embraced in the same way,” said Bruce Bond, CEO of Innovator ETFs.
John Southard, CIO of Innovator ETFs, says: “Today’s ultra-low yielding and low forward-looking return environment for US equities is challenging advisors’ ability to hit their clients’ return goals with traditional portfolio assets, strategies and allocations. The idea with the Innovator Stacker ETFs is to allow investors to participate in the potential upside, to a cap, across multiple US equity market segments without taking on the potential downside risk and additional volatility of Growth and Technology, as well as Small-Caps. And with the ‘Stackers’, advisors don’t have to be right about which US equity market segment to allocate to based on fundamentals, technicals, geopolitics or stimulus measures, etc; you can get multiple exposures in a single ETF. Especially in low-return equity markets, we feel the ‘Stackers’ hold significant appeal and they could displace allocations to active managers given the transparency, return parameters and outperformance potential.”
“Another reason we see the ‘Stackers’ resonating with advisors is that they will be able to map their annual market return expectations directly to a specific Stacker ETF™. The Innovator Stacker ETFs™ will allow advisors to know their potential outcomes prior to investing, including the environments in which they can potentially outperform the US large-cap equity market. To do all this with the benefits of liquidity, transparency and tax-efficiency illustrates the beauty of the ETF vehicle and the utility we think the ‘Stackers’ will bring to advisors’ playbooks,” adds Bond.