In upward trending markets, Step-Up Strategy ETFs seek to provide tax-efficient strategies to lock-in SPY gains, reset upside participation and eliminate potential downside before buffer1
In downward markets, Step-Up Strategy ETFs seek to capture potential excess return relative to SPY, benefit from typically higher upside caps during volatility and refresh buffers against loss
Innovator Buffer Step-Up Strategy ETF (BSTP) will actively manage a portfolio of options to seek upside participation to SPY in rising markets and renewed buffers to hedge against SPY losses up to 9% in falling markets
Innovator Power Buffer Step-Up Strategy ETF (PSTP) will actively manage a portfolio of options to seek upside participation to SPY in rising markets and renewed buffers to hedge against SPY losses up to 15% in downward markets
Tax-efficient strategies for taxable accounts, Managed Outcome ETFs™ provide advisors single ticker managed portfolios to streamline Defined Outcome ETF™ investing
CHICAGO, March 07, 2022 (GLOBE NEWSWIRE) — Innovator Capital Management, LLC (Innovator) the pioneer and leader of Defined Outcome ETFs™, today announced the planned launch of the Innovator Buffer Step-Up Strategy ETF (BSTP) and the Innovator Power Buffer Step-Up Strategy ETF (PSTP) tomorrow, Tuesday, March 8th, 2022 on NYSE Arca. The latest in Innovator’s Managed Outcome ETF™ lineup, the new “Step-Up” Strategy ETFs will seek to provide advisors with tax-efficient ways to seek upside in directionally positive markets while continuously refreshing buffers against loss in the SPDR S&P 500 ETF Trust (SPY) during down markets. The planned Funds were designed to be a solution for advisors who value the concept of Buffer ETFs™ but would rather have the process of evaluating return parameters and investing in buffered equity strategies professionally managed.
Much like Innovator’s flagship U.S. Equity Buffer and U.S. Equity Power Buffer ETFs™, the Step-Up Strategy ETFs will consist of three layers of customized 12-month FLEX Options contracts that seek upside participation to SPY, to a cap, with known buffers against SPY losses of 9% (in the case of BSTP) or 15% (in the case of PSTP). But a Step-Up Strategy ETF can rebalance its portfolio when it is deemed advantageous for the Fund to do so. Using a rules-based methodology, a Step-Up Strategy ETF will reset its options portfolio – selling the existing contracts and entering into new 12-month contracts – if the Fund’s NAV rises or falls within a pre-determined range. The Funds’ step-up investment strategies seek to help investors offset the timing risks inherent in owning an options package for one year. In this manner, the Step-Up Strategy ETFs are designed to continuously seek market gains in positive markets, or provide potential outperformance relative to SPY in down markets, while refreshing buffers against the market’s downside and resetting the Funds’ upside caps to capture more of the market’s potential upside.
“The Step-Up Strategy ETFs bring to market a concept we’ve been working on for some time and one that many advisors have asked for. As we completed monthly issuance on our flagship U.S. Equity Buffer ETF lineup in May 2020, ‘stepping-up’ – selling one Buffer ETF™ for another monthly series – became a popular strategy amongst some advisors who used the Defined Outcome ETFs™ in non-taxable retirement accounts. These new funds in our Managed Outcome ETF™ lineup will seek to provide advisors with tax-efficient strategies that manage the process of ‘trading up’ from the set of return parameters of one monthly series of U.S. Equity Buffer ETF to the current month’s opportunity set, depending on market movements and conditions. We feel that the managed process behind BSTP and PSTP will provide greater access to the type of ‘step-up’ strategies that many advisors have employed, automating the process of stepping-up into new and potentially higher upside caps and refreshing the buffer against market loss. And we believe the tax-efficient nature of the Step-Up Strategy ETFs means these managed risk equity solutions may be particularly useful in taxable non-retirement accounts and model portfolios,” said Bruce Bond, CEO of Innovator ETFs.
Innovator Buffer Step-Up Strategy ETF (BSTP)
BSTP will actively manage a portfolio of 12-month options contracts to seek upside participation to SPY in rising markets2 and renewed buffers to hedge against SPY losses up to 9% in falling markets. BSTP will feature a total expense ratio of 0.89%.
Innovator Power Buffer Step-Up Strategy ETF (PSTP)
PSTP will actively manage a portfolio of 12-month options contracts to seek upside participation to SPY in rising markets3 and renewed buffers to hedge against SPY losses up to 15% in downward markets. PSTP will feature a total expense ratio of 0.89%.
In volatile periods, the Step-Up Strategy ETFs will have the added benefit of resetting into options when the market typically offers higher upside caps.
Because the Funds seek to rebalance their options portfolios under certain market conditions, the Funds do not themself pursue a defined outcome strategy over a set outcome period, nor do they seek to provide a set buffer against reference asset losses.
Managed Outcome ETFs™
The launch of the Step-Up Strategy ETFs represents Innovator’s continued buildout of the Managed Outcome ETF™ lineup. The funds within the Managed Outcome ETF™ suite seek to provide investors with professionally managed, tax-efficient and diversified portfolios based on Innovator’s industry-leading family of Defined Outcome ETFs™.
With nearly 80 Defined Outcome ETFs™, including the flagship suite of U.S. Equity Buffer ETFs™, Innovator has laid the groundwork for a range of managed strategies that seek to simplify and streamline the defined outcome investing process for advisors looking to allocate to solutions at any point in time.
Innovator Defined Outcome ETFs – Benefits to Advisors
- Pioneer and creator of Defined Outcome ETFs™ with 79 ETFs and nearly $5.9 billion AUM across family4
- Tax-efficient exposure5 to five broad equity benchmarks with buffers against loss (Large-cap U.S. Equity (SPY), Growth (QQQ), Small-Cap U.S. Equity (IWM), International Developed (EFA), Emerging Markets (EEM)) the 20+ Year U.S. Treasury Market (TLT); 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 SPY 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
- Reset annually or quarterly and can be held indefinitely as core holdings
- Innovator’s Defined Outcome ETF™ lineup has amassed 116 outcome period completions with the ETFs successfully resetting for the coming outcome period6
- Monthly issuance on SPY 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.
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 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™, Stacker ETFs™ and Floor ETFs™.
The Buffer ETFs™ seek to provide the upside performance of broadly recognized benchmarks (e.g., SPY, QQQ, IWM, EFA, and EEM, as well as 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 U.S. Equity 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 risk8 and lower costs afforded by the ETF structure.
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™, Floor ETFs, Stacker ETFs™ and the Accelerated 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. Accelerated ETFs™ are 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 an outcome period. Having launched the first Defined Outcome ETFs™ in 2018 — the flagship Innovator U.S. Equity 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 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 approximately $173.5 billion in global assets as of September 30, 2021. Milliman FRM is one of the largest and fastest-growing subadvisors of ETFs. For more information about Milliman FRM, visit www.Milliman.com/FRM.
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The Funds seek to achieve their investment objective by investing substantially all of their assets in exchange-traded options contracts on the Underlying ETF (the “Options Portfolio”).
The Sub-Adviser will actively monitor the performance of the portfolio and, as described below, rebalance or “step-up” the portfolio to protect capital or capture portfolio gains experienced by the Funds, depending on its evaluation of market conditions. There is no guarantee the Funds will be successful in implementing this strategy.
The Funds’ “step-up” investment strategy seeks to help the Fund shareholders offset the timing risks inherent in owning an options package for one year.
With the step-up investment strategy, the Funds may, at the end of each month, sell the then-current Options Portfolio and immediately enter into new FLEX Options contracts with a new one-year duration and will therefore continue to have the potential to increase in a market environment where the value of the Underlying ETF is steadily increasing. Likewise, the Funds will have the potential to derive continued benefit from the Buffer in a market environment where the Underlying ETF is steadily decreasing, as it will have the ability to reset the Options Portfolio at the end of each month for an additional 9% or 15% annualized Buffer.
An investment in the Funds allows a shareholder to participate in the opportunistic resetting of the Funds’ Options Portfolio without undertaking any additional purchases or sales.
For the duration of its existing Options Portfolio, the Sub-Adviser will actively review the performance of the Funds at each month-end and consider market volatility, time remaining until the expiration of the FLEX Options contracts and strike prices of the replacement FLEX Options contracts when evaluating whether to reset the Options Portfolio. To the extent the Funds’ NAV increases (generally a range from 2% to 6%) or decreases (generally a range from -1% to -5%), the Sub-Adviser will seek to realize any gains experienced by the Fund or Buffer used by the Fund by resetting the Fund’s Options Portfolio and, in doing so, “step-up” the Fund’s upside potential and Buffer. The Funds’ step-up investment strategy may cause the Fund to have a high portfolio turnover rate.
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.
Management Risk. The Fund is subject to management risk because it is an actively managed portfolio. The Sub-Adviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that the Fund will meet its investment objective.
Step-Up Strategy Risk. There is no guarantee the Fund will be successful in implementing a step-up strategy. In order to provide the Buffer, the Fund’s strategy is subject to maximum potential gains. This maximum potential gain will likely change at each resetting of the Option’s Portfolio. In the event an investor purchases Shares after the FLEX Option contracts were entered into and prior to a step-up or the expiration of such option contracts, there may be little or no ability for that investor to experience an investment gain on their Shares or little or no ability to benefit from the Buffer until the Sub-Adviser rebalances the Fund’s Options Portfolio. However, there is no guarantee that, at the end of any given month, the Fund will be able to enter a more advantageous Options Portfolio and implement the step-up mechanism. Fund’s step-up strategy may result in performance that is lower than that of the reference asset or of a fund with an options portfolio that does not implement a step-up strategy. Because the value of the Options Portfolio does not increase or decrease at the same rate as the reference asset’s share price on a day-to-day basis (although they generally move in the same direction) there will be periods of time in which the Fund’s NAV underperforms the price return of the reference asset. In this situation, if the Sub-Adviser rebalances the Options Portfolio prior to its one-year expiration in accordance with the step-up strategy, the Fund may have underperformed the reference asset for that period of time. Similarly, the Sub-Adviser may elect to reset the Fund’s Options Portfolio at a point in time in which the Fund has utilized all or a portion of its Buffer. While this will provide shareholders with the potential of an additional Buffer, the Options Portfolio would simultaneously reset its maximum gain potential and could lower the Fund’s upside performance potential over certain time periods.
Buffer Risk. There can be no guarantee that the Fund will be successful in providing the Buffer. A shareholder may lose their entire investment. The Buffer is provided at the expiration of the options contracts. Any interim losses experienced by the Underlying ETF may be experienced by the Fund and its shareholders. Because the Options Portfolio provides a Buffer against the first 9% or 15% of Underlying ETF losses only for the duration of the one-year term of the options contract, it is possible that, during the term of any Options Portfolio, shareholders will realize some losses on initial price decreases of the Underlying ETF of less than 9% or 15%. These potential losses are possible even if a shareholder remained in the Fund for a one-year period after an Options Portfolio was established, as it is likely that the Options Portfolio will reset during time.
THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).
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.
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.
BSTP and PSTP are not yet available for investment.
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 © 2022 Innovator Capital Management, LLC.
1 Downside Before Buffer is defined as the amount of Fund loss incurred before the buffer begins, due to the Fund appreciating in value.
2 Relative to the monthly U.S. Equity Buffer ETF that statically holds the same portfolio of options for the duration of the 12-month outcome period and which may become capped out from further participation in the upside movement of the reference asset SPY.
3 Relative to the monthly U.S. Equity Power Buffer ETF that statically holds the same portfolio of options for the duration of the 12-month outcome period and which may become capped out from further participation in the upside movement of the reference asset SPY.
4 ETF count and AUM in all Innovator Defined Outcome ETFs™ as of 2.25.2022, excluding Managed Outcome ETFs™
5 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.
6 As of 3.01.2022
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.
8 Defined Outcome ETFs are not backed by the faith and credit of an Issuing institution, so they are not exposed to credit risk.