Goldman makes a $2 billion bet on ‘boomer candy’
The bank is buying Innovator Capital Management, which specializes in ETFs that protect investors from market downturns.
Goldman Sachs on Monday said it would acquire Innovator Capital Management for about $2 billion, a bet on a fast-growing corner of the exchange-traded fund market that has been called candy for the retired baby-boomer crowd.
Innovator supervised some $28 billion in assets across 159 funds, as of Sept. 30. The company has a special focus on so-called defined-outcome funds, or buffer funds, which use options contracts to offer investors protection from market downturns while retaining access to some of the gains.
Baby boomers and people close to retirement have flocked to the funds as a way to stay invested in the market even while trying to remain conservative, earning buffer funds and others like them the nickname “boomer candy."
Goldman said the deal would make its asset-management arm a top 10 provider of active ETFs.
It is the latest acquisition by the Wall Street firm to broaden its offerings to clients outside of traditional investing and furthers Chief Executive David Solomon’s goal of building up the bank’s asset-management division.
In October, Goldman said it would acquire venture-capital firm Industry Ventures for up to $965 million. The firm in September said that it would invest $1 billion in asset manager T. Rowe Price and that the two would collaborate to bring a slice of private-market investments to 401(k)s.
Buffer funds have grown in popularity in the past several years amid investor angst about market volatility and the specter of a longer downturn. Innovator was a pioneer in the space, launching its first offering in 2018.
Buffer funds are a form of active ETF. Unlike traditional passive ETFs, which track a market index like the S&P 500, these funds are curated by a manager who chooses a collection of securities and is aiming to outperform the broader market.
They are part of a broader category of U.S.-listed equity ETFs that offer downside protection on stock indexes. Funds that offer protection on the S&P 500 took in more than $10 billion in net inflows this year and now hold about $65.7 billion in total assets, according to FactSet.
Defined-outcome funds have drawn criticism from some in the investing world, who have argued that the ETFs don’t offer the same diversification as traditional bonds and deliver lackluster upside. Their possible returns also depend on interest rates—lower rates typically mean less in possible gains.
Goldman said the deal consideration was payable in a combination of cash and equity, subject to reaching certain performance goals.
Write to Ben Glickman at ben.glickman@wsj.com
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