Goldman Sachs Asset Management is placing a massive bet on defined outcome exchange-traded funds, also referred to as buffer ETFs, which apply options to help shield against market losses.
In this specific month, the Goldman Sachs company settled on the acquisition of the defined outcome ETF provider, Innovator Capital Management, at a cost of $2 billion. The agreement is projected within the first half of next year.
Partner, Global Co-Head of Third-Party Wealth and Chief Transformation Officer in Goldman Sachs Asset Management, Brayon Lake, anticipates that the funds will become a significant growth driver in the industry.
Bryon Lake informed CNBC’s ETF Edge that “We did this deal with Innovator. We’ve loved that business for years. We’ve known the founders. We’ve known the team. We’re really excited about this space that they’ve invented, the defined outcome space. Defined outcome, in particular, is a very fast and attractive space to us.”
He stated that “They’re looking for income. They’re looking for downside protection. They’re looking for further growth.”
The Kathmere Capital Management, with assets under management totaling $3.4 billion as of late November, has a heavy investment in the ETFs.
Chief Investment Officer of the firm, Nick Ryder, added that some of its client portfolios have defined-outcome ETFs as part of a stock strategy designed to minimize downside risk. They are applied together with such tools as trend-following and covered-call strategies.
Ryder said that “There’s both a client demand for these and we also see a role for them in portfolios.”
He mentioned that the ETFs are so appealing since they are intended for investors with a favorable exposure to the stock market and an in-built safety net.
Ryder added that “Equities go up, and they go down. Over the long haul, they tend to work their way upwards to the right. But we know as through years of experience… the ride is anything but smooth. So for us, this category of these risk-managed equity solutions… plays a role in a portfolio, and that’s where our adoption is really driven by.”
