Goldman Sachs Asset Management is significantly expanding its presence in the exchange-traded fund (ETF) market by acquiring Innovator Capital Management, a firm specializing in defined outcome ETFs, for $2 billion. The acquisition is anticipated to finalize in the first half of next year. Defined outcome ETFs, or buffer ETFs, utilize options to mitigate market losses, offering investors a safety net while maintaining exposure to equity markets.
Bryon Lake, co-head of Goldman Sachs’ Third-Party Wealth team, expressed enthusiasm for the transaction, highlighting the longstanding relationship with Innovator’s founders and team. He views this sector as an emerging growth opportunity in the industry. Lake stated, “Defined outcome is a very fast and attractive space to us,” citing investor demand for income, downside protection, and potential for growth as key reasons for the firm’s focus on this market.
Kathmere Capital Management, with assets under management totaling $3.4 billion, has also embraced defined outcome ETFs, incorporating them into strategies designed to lower downside risk. Nick Ryder, the firm’s chief investment officer, noted that the ETFs cater to clients’ needs for stock market exposure while providing a built-in safeguard. He emphasized that this category of risk-managed equity solutions is vital for navigating the inherent volatility of the market.
Overall, the growing interest in defined outcome ETFs suggests a broader trend among investors seeking stability amid fluctuating equity markets.
Why this story matters
- The acquisition marks a significant trend towards innovative investment strategies aimed at risk management.
Key takeaway
- Defined outcome ETFs are gaining traction as investors seek protection from market volatility while aiming for growth.
Opposing viewpoint
- Critics may argue that reliance on such structured products could compromise potential returns in a rising market.
