Latest news with #bufferETFs
Bloomberg
07-07-2025
- Business
- Bloomberg
Cathie Wood Targets Investor Jitters With Buffer ETFs Designed to Limit Equity Losses
Cathie Wood's Ark Investment Management LLC is moving into the fast-growing market for buffer ETFs designed to limit equity losses, at a time when her tech funds continue to bleed assets. The investment firm last week submitted paperwork to launch four exchange-traded funds that seek to protect investors against modest losses in the equity market while still offering upside. The idea is simple: When stocks drop, the ETFs cushion the fall, shielding investors from some losses. When the market rises, they deliver gains, though these are capped, too.
Yahoo
02-07-2025
- Business
- Yahoo
Innovator's New Buffer ETFs Can Gain in Up and Down Markets
Innovator, the firm behind the first defined-outcome ETFs, launched a new category of products on Tuesday: Dual Directional Buffer ETFs. These funds aim to give investors the ability to profit from both modest gains and modest losses in the market while still offering downside protection. The first two funds in the lineup are the Innovator Equity Dual Directional 15 Buffer ETF (DDFL) and the Innovator Equity Dual Directional 10 Buffer ETF (DDTL). Like traditional buffer ETFs, these are built using options to deliver a specific outcome over a one-year period. But instead of only offering capped upside and downside buffers, these new ETFs introduce an inverse return feature. For example, if the S&P 500 rises, DDFL will match the return up to 8.79% (gross of fees). If the market falls anywhere between 0% and 15%, the fund will increase by the same amount, delivering a positive return equal to the market's decline, up to 15%. But if the market drops more than 15%, DDFL does not provide any inverse gains. Instead, it simply absorbs the first 15% of losses; investors bear any losses beyond that. That means DDFL can generate positive returns even in modestly declining markets, something traditional buffer ETFs do not offer. For comparison, a traditional buffer ETF like the Innovator U.S. Equity Power Buffer ETF – July Series (PJUL) provides a higher upside cap of 12.09% and a 15% downside buffer but no potential gains in down markets. In other words, with the new 'dual directional buffer ETFs,' you're giving up some upside in return for the ability to profit from moderate declines. PJUL will outperform in strong bull markets due to its higher cap, while DDFL is better positioned for modest pullbacks since it offers gains when the market falls by up to 15%. This new structure adds to Innovator's growing defined-outcome ETF lineup, which already includes variations across buffer levels, index exposures and asset classes. As with all defined-outcome ETFs, it's important to note that the promised returns are based on holding these dual-directional buffer ETFs through the end of the outcome period. If you sell early, performance can vary depending on when you enter and | © Copyright 2025 All rights reserved Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
26-06-2025
- Business
- Yahoo
Buffer ETFs Offer Strategic Ways to Hedge
Buffer exchange-traded funds offer ways to allow financial advisors to be as strategic or tactical as they want to be with their portfolios. They also offer targeted ways for advisors to protect their clients' portfolios when traditional markets become more correlated, ETF issuers say. In the past five years, buffer ETFs have gathered $60 billion in assets and continue to grow. These ETFs use options to restructure risk, giving investors downside protection in exchange for some upside. 'You can know what your upside cap rate is, and you know what your protection level is, how many days are remaining, any time the market's open, and you can decide if that's a good trade for you or not,' said Jeff Chang, president at Vest, which offers buffer ETFs. He spoke at a panel on buffer ETFs the Morningstar Investment Conference on Wednesday in Chicago. Matthew Kaufman, head of ETFs at Calamos Investments, who also spoke on the panel, said buffer ETFs 'can nail the risk tolerance that you're looking for' as financial advisors work with clients. Buffer ETFs may not be appropriate for young, aggressive investors, but for people with more moderate risk tolerance or clients who are getting close to retirement, the funds are a way to use behavioral economic tools to keep them invested. Chang said buffer ETFs offer hedging protection in 60/40 stock/bond portfolios because of their options use and are a liquid way to diversify risk. 'If I buy the S&P and buy an S&P put, that put is perfectly negatively correlated to S&P. There is no question. It's like buying insurance,' he said. Chang pointed to 2022 when both stocks and bonds fell as inflation increased and interest rates went up sharply. 'What do you have in your client's portfolio that is going to save them if 2022 repeats itself?' he asked. Tim Urbanowicz, chief investment strategist at Innovator Capital Management, said buffer ETFs can give retirees portfolio protection but also growth from equities. Retirees can't afford drawdowns of 20% or 30%, he said. Instead of changing their portfolio from a 60/40 stock/bond allocation and moving it to a 20/80 allocation when they retire, buffers can help. 'We're going to maintain that equity exposure, but we're going to do so using a buffer to make sure that you know that cash they need is going to be protected while still maintaining a growth,' he | © Copyright 2025 All rights reserved Sign in to access your portfolio
Yahoo
26-06-2025
- Business
- Yahoo
Buffer ETFs Offer Strategic Ways to Hedge
Buffer exchange-traded funds offer ways to allow financial advisors to be as strategic or tactical as they want to be with their portfolios. They also offer targeted ways for advisors to protect their clients' portfolios when traditional markets become more correlated, ETF issuers say. In the past five years, buffer ETFs have gathered $60 billion in assets and continue to grow. These ETFs use options to restructure risk, giving investors downside protection in exchange for some upside. 'You can know what your upside cap rate is, and you know what your protection level is, how many days are remaining, any time the market's open, and you can decide if that's a good trade for you or not,' said Jeff Chang, president at Vest, which offers buffer ETFs. He spoke at a panel on buffer ETFs the Morningstar Investment Conference on Wednesday in Chicago. Matthew Kaufman, head of ETFs at Calamos Investments, who also spoke on the panel, said buffer ETFs 'can nail the risk tolerance that you're looking for' as financial advisors work with clients. Buffer ETFs may not be appropriate for young, aggressive investors, but for people with more moderate risk tolerance or clients who are getting close to retirement, the funds are a way to use behavioral economic tools to keep them invested. Chang said buffer ETFs offer hedging protection in 60/40 stock/bond portfolios because of their options use and are a liquid way to diversify risk. 'If I buy the S&P and buy an S&P put, that put is perfectly negatively correlated to S&P. There is no question. It's like buying insurance,' he said. Chang pointed to 2022 when both stocks and bonds fell as inflation increased and interest rates went up sharply. 'What do you have in your client's portfolio that is going to save them if 2022 repeats itself?' he asked. Tim Urbanowicz, chief investment strategist at Innovator Capital Management, said buffer ETFs can give retirees portfolio protection but also growth from equities. Retirees can't afford drawdowns of 20% or 30%, he said. Instead of changing their portfolio from a 60/40 stock/bond allocation and moving it to a 20/80 allocation when they retire, buffers can help. 'We're going to maintain that equity exposure, but we're going to do so using a buffer to make sure that you know that cash they need is going to be protected while still maintaining a growth,' he | © Copyright 2025 All rights reserved
Yahoo
26-06-2025
- Business
- Yahoo
The Rise of the Buffer ETF
BlackRock is betting on the future of buffers. Buffer ETFs that limit downside risk but also have caps on upside gains, are having a moment. Assets have ballooned from $5 billion in 2019 to $181 billion last year, according to recent BlackRock and Morningstar data. It's expected to triple to $650 billion by the end of the decade. Despite the higher fees, buffer ETFs earn more than 10% per dollar invested per year over the past five years, per Morningstar. The dramatic rise in buffer ETFs' AUM reflects current market volatility and geopolitical turbulence, signaling a sea change in how financial professionals think about mitigating portfolio risk. 'These products have staying power,' said Charles Champagne, head of ETF strategy at Allianz Investment Management. 'They definitely have longevity.' READ ALSO: An ETF for the Buy Now, Pay Later Market and RFG's Bluemonte Jumps Into ETFs Defined outcome ETFs allow investors to buy stocks and sell them at their starting price even if prices fall, preventing losses, while also selling call options above current stock prices, limiting upside yields. The SEC's 2019 ETF rule streamlined fund launches and led to a boom in new buffered products, which are bought and sold at the beginning and end of a predetermined period. Down markets, like the investing environment of 2022, have also had a significant impact on buffers' popularity, since they are increasingly regarded as a stand-in for fixed-income when equity markets are down, according to Champagne. Although the buffer market is currently highly concentrated — First Trust and Innovator dominate the space — it is likely to grow 'from [both] an issuance standpoint and an asset standpoint,' he added. 'When the market's looking iffy, advisors tend to allocate more to fixed-income for that diversification effect and protection,' Champagne said. 'We've stress-tested portfolios… and what we found was, if you take about 10% away from fixed-income and 10% away from the equity allocation and move it into a buffer, it generally outperforms over a long-term horizon.' Buffer ETFs are also being launched at breakneck speed. According to the BlackRock study: In the past five years, nearly 500 buffer ETFs have been launched. Last year, 27% of all new ETF listings were buffer funds. Over the Hurdle (Rate). Much of the recent rise in popularity can also be attributed to the market swings following President Trump's 'Liberation Day' tariffs, as investors seek safe havens. Still, the period in which an investor buys a buffer can have a strong impact on its performance. AllianzIM offers a unique uncapped structure buffer ETF, with a limit of 15% on the downside but unlimited upside yields beyond a given 'hurdle rate.' 'It's a really strong structure when you have a bullish view on the market,' Champagne said. This post first appeared on The Daily Upside. To receive exclusive news and analysis of the rapidly evolving ETF landscape, built for advisors and capital allocators, subscribe to our free ETF Upside newsletter.
