Innovator Capital Management has introduced a new US equities ETF that aims to outperform the S&P 500 by delivering accelerated returns when the stock market is trending upwards.

Bruce Bond, CEO of Innovator ETFs.

The Innovator Uncapped Accelerated US Equity ETF (XUSP US) has been listed on Cboe BZX Exchange with an expense ratio of 0.79%.

XUSP is similar to Innovator’s suite of existing ‘Accelerated’ ETFs in that it gains its exposure by investing in FLexible EXchange (FLEX) Options – customizable exchange-traded option contracts guaranteed for settlement by the Options Clearing Corporation – on a mainstream US equity ETF, specifically the SPDR S&P 500 ETF (SPY US).

XUSP holds four FLEX Options on SPY with each option having a one-year outcome period and being staggered at quarterly intervals throughout the year. Expiring FLEX Options are rolled into new one-year FLEX Options, allowing XUSP to be perpetual in nature and suitable as a long-term core holding.

However, unlike Innovator’s existing Accelerated ETFs, which achieve their accelerated gains at the cost of caps on the upside performance of the underlying FLEX Options, XUSP’s underlying FLEX Options have no upside performance caps.

Instead, each FLEX Option underlying XUSP will generally provide no return for the first 5% of SPY’s returns from the start of that option’s outcome period. The accelerated returns then kick in immediately above 5% with the rate of acceleration determined by market conditions when the FLEX Option is purchased.

XUSP has no downside buffer and generally tracks SPY on a one-to-one basis when US equities are on the downtrend.

Innovator notes that XUSP may serve as a core portfolio solution in place of mandates to active stock fund managers over the long term. The fund may also be utilized in a more tactical manner to express a shorter-term bullish view on the prospects for US large-cap stocks.

Bruce Bond, CEO of Innovator ETFs, said: “Advisors have grown disenchanted with active equity managers failing to beat their benchmarks over the long-term. A number of advisors we speak to have expressed a desire for an investment strategy that could potentially outperform SPY in positive markets, but without relying on an active manager’s stock selection skill or their ability to correctly time the market. They also sought a strategy they could stick with and know what it is designed to do rather than chase performance across the style box and various sectors or try to identify the next hot factor. XUSP is designed to deliver structural alpha, meaning it will seek to provide accelerated and uncapped upside returns over periods when the market returns positively in excess of performance thresholds.”