Goldman Sachs Asset Management is placing a significant wager on defined outcome exchange-traded funds — often referred to as buffer ETFs, characterized by their use of options to mitigate market losses.
In a strategic move this month, Goldman Sachs announced an agreement to purchase Innovator Capital Management, a pioneer in defined outcome ETFs, for $2 billion. This acquisition is scheduled for completion in the first half of the coming year.
Bryon Lake, who co-leads the firm's Third-Party Wealth division, believes that these funds will serve as a vital growth catalyst for the sector. We pursued this deal with Innovator, a business we have admired for many years. We have deep ties with the founders and their team, and we are genuinely enthusiastic about the defined outcome space they've carved out,
Lake shared on CNBC's ETF Edge. The defined outcome segment is especially appealing and rapidly growing for us.
Lake cites the ETFs' ability to address specific investor needs as a key factor in their attractiveness. Investors are seeking income, protection against losses, and avenues for further growth,
he explained.
Kathmere Capital Management, which manages $3.4 billion in assets as of late November, incorporates ETFs extensively into their strategies. Their chief investment officer, Nick Ryder, noted that defined outcome ETFs are integrated into some client portfolios as a component of a stock strategy aimed at minimizing downside risk, alongside other toolsets like trend-following and covered-call strategies.
There is both client demand for these products, and we perceive them as fulfilling a functional role within portfolios,
Ryder remarked. He emphasized the appeal of these ETFs as they cater to investors interested in stock market exposure with a protective mechanism in place.
Stocks experience ups and downs, usually trending upwards over time, but historically the journey is far from smooth,
observed Ryder. For us, this category of risk-managed equity solutions has a definitive place in a portfolio, and that's why our adoption of them is increasingly driven by this realization.