Options-based ETFs have become a major part of the overall investing landscape. Investor demand has grown significantly for strategies that take advantage of ETF flexibility to meet portfolio goals. Options-based ETFs that provide income via options hold significant appeal to those at or near retirement but also other investors that want to get specific outcomes from portfolios. What does the new year hold for this increasingly relevant ETF category?
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Goldman Sachs has made some notable moves within that space. The firm announced last month that it would acquire one of the most active shops within options-based ETFs, Innovator Capital Management. The move brings Innovator’s suite of “defined outcome” ETFs, often described as buffer ETFs, under Goldman Sachs’ roof. Those ETFs use options and a combination of upside and downside limits to chase more predictable returns and income.
That Innovator suite joins Goldman Sachs’ own income and options-based ETFs like GPIX and GBXC. GPIX, the Goldman Sachs S&P 500 Premium Income ETF, changes a 29 basis point (bps) fee for its approach to income.
The strategy is the fifth-largest ETF offered by the firm when ranked by AUM. GPIX combines a call option strategy with active exposure to the S&P 500. That options overlay strategy has helped the options-based ETF provide an 8% 12-month trailing distribution rate per Goldman Sachs data. That has helped GPIX return 16.4% over the last one year period per ETF Database data.
The company has added to its options-based ETF suite with GBXC, the Goldman Sachs U.S. Large Cap Buffer 3 ETF, launched last year, as well. GBXC charges a 50 bps fee to offer investors an active combination of buffer strategies. GBXC’s two buffer strategies combine protection against the first 5% to 15% of losses and a further protective layer against losses over 30%. GBXC has returned 3.3% over the last three months.
Looking at the rest of the year, income and options-based ETFs like GPIX and GBXC. With firms like Goldman Sachs digging further and further into the category, investors may want to watch what’s to come therein.
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