Goldman Sachs makes big bet on ETFs focusing on downside protection

Goldman Sachs Asset Management Makes a $2 Billion Bet on Defined Outcome ETFs

Goldman Sachs Asset Management recently made a significant move in the exchange-traded fund (ETF) space by acquiring defined outcome ETF provider Innovator Capital Management for $2 billion. This deal, set to close in the first half of next year, showcases the firm’s belief in the potential of buffer ETFs, which use options to mitigate market losses.

Bryon Lake, co-head of Goldman Sachs’ Third-Party Wealth team, expressed optimism about the future of defined outcome ETFs, referring to them as a “major growth engine for the industry.” Lake highlighted the specific advantages that these funds offer to investors, such as income generation, downside protection, and growth potential.

Kathmere Capital Management, a firm with $3.4 billion in assets under management, has also recognized the value of defined outcome ETFs in client portfolios. Nick Ryder, the firm’s chief investment officer, explained that these ETFs are utilized as part of a broader strategy to reduce downside risk, complementing other risk management tools like trend-following and covered-call strategies.

Ryder emphasized the appeal of defined outcome ETFs for investors seeking exposure to the stock market while having a safety net in place. He acknowledged the inherent volatility of equities and the importance of managing risk within investment portfolios. By incorporating risk-managed equity solutions like defined outcome ETFs, investors can navigate market fluctuations more effectively.

Overall, the acquisition of Innovator Capital Management by Goldman Sachs underscores the growing interest in defined outcome ETFs within the investment community. As these innovative products continue to gain traction, they are poised to play a significant role in shaping the future of ETF investing.