The Innovator S&P 500 Defined Outcome ETFs – July Series have an initial outcome period of less than 12 months to allow the period to conclude on June 30, 2019. At that point, the funds will resume their respective anticipated 12-month outcome periods. Current cap ranges in the July Series are lower due to the shortened outcome period.
Innovator plans to issue a quarterly series of each Defined Outcome ETF to enable investors to purchase shares as close to the beginning of their respective outcome periods as possible. Investors will also be able to purchase shares of a previously listed Defined Outcome ETF throughout the entire outcome period, and obtain a new set of defined outcome parameters, which will be disclosed through a web tool on Innovator’s website.
“This tool enables people to know what their payout would be if they bought today, so they know approximately what they can expect for the rest of the period,” says Bruce Bond, CEO of Innovator Capital Management.
ETF Structure
If this all sounds like a lot of moving parts . . . well, you're right. Innovator filed for these funds with the Securities and Exchange Commission late last year and expected to roll them out in early 2018. But Innovator says the SEC scrutinized these products because they are the first defined-outcome products in an ETF wrapper.
“While it took more time than expected to get approved, that’s because this was such a novel product,” says Bond. “But at the same time it has been approved, which means the SEC recognizes that it can offer value to investors.”
Bond said those words last week, when the BJUL fund still had its initial mandate of a 10 percent buffer and was expected to launch today. That mandate has since been changed to a 9 percent buffer, and its launch date has been pushed back as Innovator works through the regulatory details.
Traditional structured products that offer specified outcomes typically are issued by investment banks and insurance companies for institutional and wealthy investors. Many investors shy away from them due to their complexity, illiquidity and high costs.
Innovator touts its new ETFs as a low-cost, transparent, liquid and tax-efficient way to access products built with defined outcomes that let investors stay invested in the market knowing they have upside growth potential and downside protection levels.
And Bond recognizes that financial advisors will need some education about these products, which is why Innovator will host a webinar about these funds next Wednesday.