Insights | 08.07.20

Stock Rally Is Driving Billions Into Funds That Limit Losses

by: Katherine Greifeld

The darkening economic backdrop to the US equity rally has prompted increasing demand for a breed of ETFs known as buffers that promise to both share in gains and cushion losses. Investors have poured more than $2.2 billion this year into buffers, which seek to shield them against a certain percentage of declines in return for a cap on their potential upside. Fear of missing out on the S&P 500’s march back toward a record combined with rising coronavirus cases is boosting the appeal of these defined-outcome products, says Bruce Bond at Innovator ETFs. The firm launched buffers in 2018, targeting retail investors and financial advisers looking to manage risk. Defined-outcome ETFs may soon branch outside of equities. Innovator filed plans with the SEC in June for a bond ETF that would track the performance of BlackRock Inc.'s iShares 20+ Year Treasury Bond ETF on a buffered basis.

Read the full article on Bloomberg.