CHICAGO, March 30, 2023 (GLOBE NEWSWIRE) -- Innovator Capital Management, LLC (Innovator), pioneer and provider of the largest lineup of Defined Outcome ETFs™, today announced the anticipated listing of a new suite of income-focused Defined Outcome ETFs™. The Innovator Premium Income Barrier ETFs™ (Barrier ETFs™) are the world’s first ETFs that seek to offer fixed rates of high income with protective barriers against decline in the S&P 500, over a one-year period.
As part of Innovator’s industry-leading lineup of Defined Outcome ETFs, the Premium Income Barrier ETFs will seek high rates of investment income with protective barriers against reference asset price declines. There is no guarantee that the Fund will be successful in its attempt to provide a Barrier. It is important for investors to understand that the Fund bears all losses of the equity index if the equity index losses exceed the barrier sought.
The launch of the Barrier ETFs represent another ETF industry milestone and reflect Innovator’s continued dedication to disrupting the asset management, structured products and insurance industries for the potential benefit of advisors and the end investor.
Expected to list April 3rd on Cboe BZX, the initial four Innovator Premium Income Barrier ETFs are enumerated below with their recent indicative distribution rate ranges and barrier levels:
*The Distribution Rates are based on the average rates as illustrated by the Funds' strategy, based upon the five trading days prior to March 30th and are shown gross of each fund’s 0.79% management fee. “Distribution Rate” refers to the maximum potential return, before fees and expenses and any shareholder transaction fees and any extraordinary expenses, if held over the full Outcome Period. “Barrier” refers to the initial amount of downside protection the fund seeks to provide, before fees and expenses, over the full Outcome Period. If the decrease in the price of the reference asset at the end of the Outcome Period exceeds the barrier level, investors will experience the entirety of reference asset losses. Outcome Period is the length of time over which the defined outcomes are sought. Upon fund launch, the distribution rates can be found on a daily basis via www.innovatoretfs.com.
“We’ve experienced a steady drumbeat of advisor interest for income-focused Defined Outcome ETFs™, and we’re excited to be able to meet that demand,” said Bruce Bond, CEO of Innovator ETFs. “The Barrier ETFs are unique in that they are designed to offer meaningful positive return potential in up or down markets, which we believe creates a compelling portfolio diversification benefit.”
“Unlike traditional covered call strategies that generate a fluctuating level of income and seek no built-in downside risk management, the Barrier ETFs seek to offer a pre-determined fixed level of income over the outcome period, along with a protective barrier against losses,” added Bond.
“The traditional income sleeve of a portfolio often has a large allocation to bonds and carries significant exposure to both interest rate risk and corporate credit risk,” said Graham Day, CIO of Innovator ETFs. The Barrier ETFs hold option positions on the large-cap U.S. equity market and have one-year outcome periods, leaving them with no exposure to bank credit risk and very low duration.” Rather than taking the form of a bank obligation, Barrier ETFs™ custody the assets (flex options and U.S. Treasuries) that determine the fund’s NAV. Day went on to note, “Similar to the fixed coupon paid by a bond, on the first day of each outcome period the Barrier ETFs™ will declare a 12-month distribution amount to be paid quarterly, enabling investors to know how much income they can expect to receive each quarter.”
Innovator intends to build out its suite by listing additional series of Barrier ETFs in July, October and January, providing advisors and investors additional opportunities to pursue high income across different market environments.
The Funds will invest in FLexible EXchange Options (“FLEX Options”) that reference the S&P 500® Price Return Index (the “U.S. Equity Index”) and in U.S. Treasury bills (“U.S. Treasuries”) to employ an income-oriented “defined outcome strategy.”
At the end of the outcome period, if the reference asset price has increased or has decreased to a level inside the barrier, the NAV of the ETF is designed be unchanged from its NAV at the start of the period. If the reference asset finishes the outcome period below the barrier level, the NAV of the ETF is designed to be down by the same amount and to generate a total return that exceeds reference asset return by the amount of the distribution rate at the start of the period.
The Barrier ETFs will be part of Innovator’s category-creating Defined Outcome ETF family – the first group of ETFs designed to provide investors with built-in buffers against losses of -9% (“Buffer”), -15% (“Power Buffer”) or -30% (“Ultra Buffer”) and exposure to the growth of core markets, to a cap, in a tax-efficient vehicle over a one-year outcome period. Innovator currently has an industry-leading 80 Defined Outcome ETFs in the market, as well as six Managed Outcome ETFs™, and total assets under management (AUM) of $12.2 billion.
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. Innovator’s category-creating Defined Outcome ETF™ family includes Buffer ETFs™, Premium Barrier Income ETFs, Accelerated ETFs®, and Floor 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. Having launched the first Defined Outcome ETFs™ in 2018 -- the flagship Innovator S&P 500 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.
There are material differences between traditional fixed income asset classes and the Innovator Barrier ETFs, which seek to provide a high level of income. The NAV of Barrier ETFs are tied to the underlying options on the S&P 500, a broad-based measure of the large cap U.S. equity market. The value of fixed income products is tied to the value of the fixed income instruments the products hold. Within a corporate capital structure, equity is generally subordinate to fixed income assets and, as such, carries a higher level of risk than fixed income assets.
† The estimated Distribution Rate Ranges are based on the highest and lowest rates as illustrated by the Funds' strategy, based upon the 20 trading days prior to March 8th, and are shown gross of the fund's management fee. They do not represent the actual distribution rates that will be set on the date of rebalance, which may fall outside the stated ranges, due to extreme market volatility. The distribution rates for each Fund will be set at the beginning of the Outcome Period, and is dependent upon market conditions at that time.
* 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.
THE FUNDS ARE NOT YET AVAILABLE FOR TRADING. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS COMMUNICATION SHALL NOT CONSTITUTE AN OFFER TO BUY OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER SECURITIES LAWS OF ANY SUCH STATE.
AN INDICATION OF INTEREST IN RESPONSE TO THIS ADVERTISEMENT WILL INVOLVE NO OBLIGATION OR COMMITMENT OF ANY KIND.
Interim Period Shareholders
Unlike structured notes, which offer limited liquidity, Innovator Defined Outcome ETFs™ trade throughout the day on an exchange, like a stock. As a result, investors purchasing shares of a Fund after its launch date may achieve a different payoff profile than those who entered the Fund on day one. Innovator recognizes this as a benefit of the Funds and provides a web-based tool that allows investors to know, in real-time throughout the trading day, their potential defined outcome return profile before they invest, based on the current ETF price and the Outcome Period remaining. Innovator’s web tool can be accessed at http://www.innovatoretfs.com/define.
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.
Investment Objective: The Funds seeks to provide investors, over a 1 year period (outcome period), with an investment that provides a high level of income through a Defined Distribution Rate and that is not subject to any losses experienced by the U.S. Equity Index that are at or below the respective Barrier (10, 20, 30, 40) and is subject to initial losses experienced by the U.S. Equity Index beginning at the Barrier and to the full extent of U.S. Equity Index losses on a one-to-one basis beginning after the barrier threshold has been crossed.
Barrier ETFs distribution rate sought by the Funds are based upon a yield rate that is comprised of the yield generated by the U.S. Treasuries and the premiums received from the Fund selling FLEX Options (the “Yield Rate”).
Over each Outcome Period, shareholders will also be subject to U.S. Equity Index losses that are based upon an investment “barrier,” which is an investment strategy whereby a payoff depends on whether an underlying asset has breached a predetermined performance level. The Funds seek to provide a pre-determined barrier at 10, 20, 30, or 40%, respectively, of U.S. Equity Index losses for each Outcome Period (the “Barrier”) by selling FLEX Options that reference the U.S. Equity Index for each Outcome Period (the “Barrier Options”). There is no guarantee that the Fund will be successful in its attempt to implement the Barrier. At the commencement of the new Outcome Period, the Fund will sell new Barrier Options with an expiration date of approximately one year and invest in U.S Treasuries with a maturity date that aligns with the expiration of the new Outcome Period.
Fund shareholders also will be subject to all losses experienced by the U.S. Equity Index if the U.S. Equity Index experiences losses that exceed the Barrier at the end of the Outcome Period. If at the end of the Outcome Period the U.S. Equity Index has experienced a positive price return, or price return losses that are less than the Barrier, the Fund is designed to provide returns that equal the Yield Rate. However, if the U.S. Equity Index has decreased in value below the Barrier at the end of the Outcome Period, the Fund's investments will generate Outcomes that equal the Yield Rate less the entirety of the U.S. Equity Index's losses over the course of the Outcome Period. The Fund will not benefit from any increases in the U.S. Equity Index over the course of an Outcome Period but is subject to the possibility of significant losses experienced by the U.S. Equity Index if the value of the U.S. Equity Index drops below the Barrier at the end of the Outcome Period. An investor could lose its entire investment. The Fund will not receive or benefit from any dividend payments made by the constituents of the U.S. Equity Index.
A shareholder may lose its entire investment. In the event an investor purchases Shares after the commencement of the Outcome Period or sells Shares prior to the expiration of the Outcome Period, the Barrier that the Fund seeks to provide may not be available. In addition, the operationality of the Barrier is such that the Fund may experience dramatic changes in value of its NAV at the end of the Outcome Period, even if the changes in the U.S. Equity Index are minimal. If the U.S. Equity Index's value is at or near the Barrier at the end of the Outcome Period, small changes in the value of the U.S. Equity Index could result in dramatic changes in the value of the Barrier Options and therefore the Fund's NAV. Investors should understand these risks before investing in the Fund.
The Outcomes may only be realized by investors who continuously hold Shares from the commencement of the Outcome Period until its conclusion. Investors who purchase Shares after the Outcome Period has begun or sell Shares prior to the Outcome Period's conclusion may experience investment returns very different from those that the Fund seeks to provide.
The Funds' website, www.innovatoretfs.com, provides important Fund information as well information relating to the potential outcomes of an investment in a Fund on a daily basis.
The Fund uses its net assets (including the premiums received by selling Barrier Options) to purchase U.S. Treasuries that expire at the end of the Outcome Period. The U.S. Treasuries are entitled to an interest rate, which when added to the premiums received for selling Barrier Options, produce the Yield Rate. The Yield Rate is distributed to shareholders in Fund Distributions. The amount of the Fund Distributions is dependent, in part, upon the income received from the U.S. Treasuries, which is not guaranteed. If the U.S. Treasuries fail to pay income or pay less income than anticipated, the Yield Rate will not be obtained, and a Fund Distribution will be less than anticipated.
Additional Risks. 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.
FLEX Options Risk. The Fund will utilize FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (OCC). In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement obligations, the Fund could suffer significant losses. Additionally, FLEX Options may be less liquid than standard options. In a less liquid market for the FLEX Options, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. The values of FLEX Options do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of reference asset.
Innovator ETFs™, Defined Outcome ETF™, Buffer ETF™, Stacker ETF™, Accelerated ETFs™, Accelerated Plus ETF™ Enhanced ETF™, Define Your Future™, Leading the Defined Outcome ETF Revolution™ and other service marks and trademarks related to these marks are the exclusive property of Innovator Capital Management, LLC.
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 © 2023 Innovator Capital Management, LLC.