Goldman Sachs Asset Management is significantly expanding its presence in the market for defined outcome exchange-traded funds (ETFs) — commonly referred to as buffer ETFs — which employ options to mitigate market loss risks.
In a notable move, Goldman Sachs has reached an agreement to acquire Innovator Capital Management, a leading provider of defined outcome ETFs, for a sum of $2 billion. The acquisition is slated to be finalized in the first half of the upcoming year.
Bryon Lake, the firm's Third-Party Wealth team co-head, anticipates these funds will become a key growth driver within the industry.
"We did this deal with Innovator. We've admired that business for many years, having known the founders and the team. We're truly excited about the defined outcome space that they've pioneered," Lake stated during CNBC's "ETF Edge." He described the defined outcome category as "both fast-growing and appealing."
Lake highlighted the solutions these ETFs offer for investors, such as generating income, providing downside protection, and supporting further growth.
Kathmere Capital Management, with $3.4 billion in assets under management as of late November, is heavily invested in ETFs.
Nick Ryder, Kathmere's chief investment officer, explained that defined outcome ETFs are integrated into some client portfolios as part of a broader stock strategy aimed at minimizing downside risk. They are utilized alongside strategies like trend-following and covered-call methods.
"There's a dual incentive — client demand, and the strategic role these ETFs play in portfolios," Ryder noted.
According to Ryder, these ETFs are particularly appealing because they cater to investors seeking stock market exposure with an inherent safety net.
"Equities tend to experience upward movement in the long term, despite a volatile journey," Ryder commented. "For us, these risk-managed equity solutions are a vital component within a portfolio, which is why we've embraced their adoption."