Innovator Capital Management, LLC (Innovator) today announced the
listing of the first Defined Outcome Bond ETFs™, establishing a new
era in bond ETF investing. As interest rates sit near historic lows
with both duration1 and bond prices close to record highs,
Innovator Defined Outcome Bond ETFs™ are the world’s first ETFs to
provide upside exposure to bonds with built-in downside buffer
levels. The ETFs are intended to be a core bond solution in today’s
challenging interest rate reality.
Today, the Innovator 20+ Year Treasury Bond 5
Floor ETF™ – July (TFJL) and the Innovator 20+ Year Treasury Bond 9
Buffer ETF™ – July (TBJL) list on the Cboe. TFJL seeks to
provide exposure to the upside performance of the iShares 20+ Year
Treasury Bond ETF (TLT) to a cap and a floor against downside
losses in excess of 5% over the outcome period. TBJL seeks to
provide exposure to the upside performance of TLT to a cap and a
buffer against the first 9% of price losses over the outcome
period.
“We’re very excited to chart another completely
new category in the ETF world by bringing the benefits of Defined
Outcome ETF™ investing to the bond market. Today, advisors are
faced with some of the highest risk bond markets in history, which
is driving many to rethink conventional wisdom when it comes to the
core of their debt allocations. With the listing of these new
Defined Outcome Bond ETFs, advisors will finally have access to
some of the same sophisticated tools available to institutional
investors but in the liquid and tax-efficient ETF structure. We
think Innovator’s Defined Outcome Bond ETFs™ will provide
significant potential improvements to bond allocations by removing
some of the exposure to interest rate tail risk, which has grown
extreme and keeps advisors up at night. TFJL and TBJL can be
implemented as part of a core bond allocation to mitigate downside
risk while still maintaining some of the upside performance
potential,” said Bruce Bond, CEO of Innovator ETFs.
Return profiles for the Innovator
Defined Outcome Bond ETFs – July Series,
as of 8/18/20 |
Ticker |
Name |
Buffer Level |
Cap* |
Outcome Period |
TFJL |
Innovator 20+ Year Treasury Bond 5 Floor ETF™ |
5.00% Floor |
6.75% |
8/18/20 – 6/30/21 |
TBJL |
Innovator 20+ Year
Treasury Bond 9 Buffer ETF™ |
9.00% Buffer |
9.25% |
8/18/20 – 6/30/21 |
* The Caps above are shown gross of their
respective management fee (.79%). “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. The Floor is only operative against
Underlying ETF share price losses exceeding 5% over the duration of
the Outcome Period. There is no guarantee that the Fund will be
successful in its attempt to provide the Floor. If an investor
is considering purchasing Shares during the Outcome Period,
and the Fund has already increased in value, then a
shareholder may experience losses prior to gaining the protection
offered by the Floor, which is not guaranteed. Outcome Period is
the intended length of time over which the defined outcomes are
sought. The Caps can be found on a daily basis via
www.innovatoretfs.com.
At the end of TFJL and TBJL’s outcome period,
June 30, 2021, the ETFs will simply rebalance and reset, providing
investors with a fresh 5% Floor or 9% Buffer, respectively, and new
upside caps over the next one year outcome period. The ETFs do not
expire and can be long-term core bond holdings in a portfolio. The
options-based ETFs are anticipated to be as tax-efficient as
traditional bond ETFs, with no planned cap gains distributions to
shareholders and investors being able to defer taxes until
selling.
John Southard, CIO of Innovator ETFs, said,
“With rates approaching zero, bonds are increasingly bought for
diversification, not income. But with durations extending and bond
risks rising, advisors are now seeking to add a measurable buffer
to the ‘safe’ side of
their portfolio.”
“For decades, long-term U.S. Treasuries have
exhibited a strong negative correlation to equities, especially in
periods of stress and negative returns for stocks. This negative
correlation to stocks provides a strong case for long-dated U.S.
government debt in a portfolio setting. Yet, with more duration
comes more volatility, which can make owning Treasuries further out
on the curve tough to stomach. This vulnerability is magnified
today, with rates in a position where there is a lot more room to
move up than down. And with the twin engines of fiscal and monetary
policy currently creating money like never before, many worry
inflation could materialize substantially over the mid-term,”
Southard continued.
“Bonds are hyper-sensitive to interest rate
risk. In fact, if rates move back up to where they were at the
beginning of the year, core-bonds would lose -9%, and they would
fall -17% if rates were to rise to where they were two years ago.
Long-term U.S. treasury prices would fall more than -20% if rates
went back to January 1st and -34% if rates were to rise to where
they were two years ago2. Many investors cannot afford to take this
type of risk in their bond portfolios. Yet at the same time,
worries are mounting that equity allocations face risks as stock
markets continue to look past the most severe economic contraction
in our lifetimes, which makes the uncorrelated nature of long-dated
U.S. debt too important to forego in a portfolio setting. With
Defined Outcome Bond ETFs™, Innovator intends to help advisors and
investors solve this challenge by providing core bond ETF solutions
that seek to limit loss while maximizing the potential
diversification benefits of the asset class. These are tools that
can help investors stay invested,” concluded Southard.
Investors in the Innovator 20+ Yr Treasury Bond
5 Floor ETF™ and Innovator 20+ Yr Treasury Bond 9 Buffer ETF™
Suites will not receive yield from their holdings in TFJL and/or
TBJL, respectively; the ETFs are based on the price returns of TLT
over the length of the outcome period.
The Innovator 20+ Yr Treasury Bond 5 Floor ETF™
and Innovator 20+ Yr Treasury Bond 9 Buffer ETF™ Suites will charge
a 0.79% management fee. The Cboe FLEX Options forming the
underlying positions of the Innovator 20+ Yr Treasury Bond 5 Floor
ETF™ and the Innovator 20+ Yr Treasury Bond 9 Buffer ETF™ are based
on TLT because of the high volumes and deep liquidity of the
options market on the reference ETF relative to the options market
for long-dated U.S. Treasury indices. The Defined Outcome Bond
ETFs™ are likely to be issued on a semi-annual frequency.
The Innovator Defined Outcome Bond ETFs™ will be
subadvised by Milliman Financial Risk Management, the subadvisor to
the Innovator Defined Outcome Equity ETFs.
TFJL and TBJL will be part of Innovator’s
category-creating Defined Outcome ETF™ family – 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 equity markets, to a
cap, in a tax-efficient vehicle over a one year outcome period.
Innovator currently has 48 total Defined Outcome Buffer ETFs™ in
the market with total assets under management (AUM) of almost $3.2
billion and $1.25 billion in inflows year-to-date3. 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 recently won “Newcomer Alternative ETF of
the Year” and was “Highly Commended” for “ETF Suite of the Year” at
the Mutual Fund Industry and ETF Awards 2020 by Fund Intelligence**
in July.
Innovator Defined Outcome ETFs - Benefits to
Advisors
- Pioneer and creator of Defined Outcome ETFs™ with 51 ETFs4 and
nearly $3.2 billion in AUM across family5
- Tax-efficient exposure to five broad benchmark equity indexes
(S&P 500, NASDAQ 100, Russell 2000, MSCI EAFE, MSCI EM), and
now 20+ Year U.S. Treasuries
- Monthly issuance on the S&P 500 with three buffer levels
(9,15, or 30%)
- Only sponsor with a track record of completed Outcome
Periods6
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 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)) 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 products7 (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.
About Innovator Capital Management,
LLCAwarded 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. The category-creating Defined
Outcome ETFs seek to provide investors structured exposures to
broad markets, where the upside growth potential, buffer against
the downside, and outcome period are all known, prior to investing.
Having launched the first Defined Outcome ETFs in 2018 -- the
flagship Innovator S&P 500 Buffer ETF Suite -- Innovator has
listed ETFs on other key exposures, allowing advisors to
construct diversified portfolios with built-in buffers for better
risk management. 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 (BATS: 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
LLCMilliman 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.
Media ContactPaul Damon +1 (802) 999-5526
paul@keramas.net
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 Index via a
basket of Flex Options. As a result, the ETFs are not expected to
move directly in line with the Index 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 only seek to provide
shareholders that hold shares for the entire Outcome Period with
their respective buffer level against Index losses during the
Outcome Period. You will bear all Index 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.
Innovator ETFsTM, Defined Outcome ETFTM, Buffer
ETFTM, 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 © 2020 Innovator Capital Management,
LLC.
800.208.5212
1Duration is a measure of interest rate risk, how much the
prices of bonds are likely to shift if interest rates change.
2 Based on the ICE BofA US Corporate & Government Index and
the ICE US Treasury 20+ Year Index as of 8.12.2020.
3 AUM and flows are through 8.14.2020.
4 Including Innovator Laddered Fund of S&P 500 Power Buffer
ETFs (BUFF).
5 AUM in all Innovator Defined Outcome ETFs™ as of
8.14.2020.
6 Innovator Capital Management, LLC is the only issuer that has
Defined Outcome ETFs™ available that have completed a one-year
Outcome Period, with seven S&P 500 monthly series resets to
date and one for the MSCI EAFE Power Buffer ETF™ and MSCI Emerging
Markets Power Buffer ETF™ suites.
7 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.
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