Innovator ETFs has long been synonymous with buffered strategies, giving financial advisors tools to manage market risk without abandoning growth potential. With the launch of the Innovator Equity Managed 100 Buffer ETF™ (ticker: BFRZ), the firm expands its offering to include a strategy that aims to combine capital preservation, consistent exposure, and attractive upside targets—all in a structure that’s model-friendly and actively managed.
The Fund seeks to provide risk-managed investment exposure to the U.S. Large Capitalization Companies represented by the Solactive GBS United States 500 Index (Equity Index) through its hedging strategy. There is no guarantee that the Fund will be successful in providing risk-managed investment exposure to the Equity Index.
In an interview with The Wealth Advisor’s Scott Martin, Mark Galecki, Senior Product Manager at Innovator ETFs®, discussed BFRZ’s design, how it differs from traditional defined outcome funds, and why the exchange-traded fund (ETF) might appeal to advisors looking for more flexibility in deploying client capital.
Defining the Modern Buffer: BFRZ’s Unique Construction
Innovator has been driving the Buffered ETF™ category, offering strategies with exposure to the growth of a reference asset, such as the SPDR S&P 500 ETF, up to a cap (before fees and expenses), while absorbing losses up to a certain percentage.1
“With buffer funds, we provide one-to-one upside participation to a reference asset [to a cap]. . . . Then, on the downside, there are different buffer levels,” Galecki says.
While some Innovator strategies offer buffers at 9%, 15%, 20%, or even 30%, “we also have 100% downside protection buffers,” Galecki adds. “That’s become one of the more popular types of products that we’ve launched here.” BFRZ is among this group, targeting 100% downside protection, before fees and expenses, over a one-year horizon.
Supporting that risk mitigation is an active, laddered options strategy overseen by subadvisor Parametric. The goal is to shelter client capital during volatile periods while retaining a meaningful share of upside when markets trend higher.
“Many folks will look at 100% downside protection and think that there’s limited upside potential. With Parametric, we’re [trying] to create this all-weather potential profile,” Galecki says. “I think that’s attractive with the strategy.”
Why the Actively Managed Design Matters
The core innovation in BFRZ lies in its departure from traditional Defined Outcome ETFs™, which require clients to enter at specific points in time to receive the published outcome parameters. BFRZ, by contrast, is designed for ongoing allocations.
“Our basic approach here is that whenever you invest over that one-year time horizon, these are the target levels that [we pursue],” Galecki explains. “This is very different to a lot of these defined outcome approaches, which you really want to invest in at the beginning of that outcome period to experience the parameters that are disclosed at the beginning of the period.”
This model-friendly structure addresses a key pain point for advisors: the operational complexity of timing new client assets. Instead of needing to wait for a product’s reset date, the fund pursues its targeted results on a continuous basis—100% downside protection, before fees and expenses, 40–50% upside participation over a one-year time frame, and approximately one-third the volatility of the S&P 500.
That level of ongoing flexibility is crucial when managing client accounts that require ongoing rebalancing or when new assets arrive midcycle.
A Three-Legged Approach to Hedging and Growth
BFRZ’s underlying mechanics are not a simple put-buying operation or basic covered call strategy. Instead, the portfolio is constructed using three interlocking components that work together to balance protection and return potential. “The first is that equity basket. The second element is the put protection. And then last is the covered call,” Galecki explains.
The equity sleeve provides core U.S. large-cap exposure. To hedge downside, the strategy purchases 10% in-the-money long-dated puts, rolling them quarterly to maintain a constant one-year ladder of protection. Meanwhile, two-week call options are sold to generate income, which funds the cost of the puts.
“A lot of other strategies in the marketplace that may be tail hedged have a huge drag on performance because there isn’t something in the mousetrap to help offset the cost of that tail hedge protection,” Galecki says. “With Parametric combining the three elements, we have what we think is a pretty neat mousetrap.”
By combining short-term calls with long-term puts and maintaining a diversified basket of equities, BFRZ targets a compelling outcome: partial equity upside, limited downside, and lower volatility—all wrapped in an ETF with daily liquidity.
Rolling Structure Keeps the Portfolio Adaptive
One of the differentiators in BFRZ is how it manages the timing and duration of its options strategy. The put protection resets quarterly, while call options expire every two weeks, allowing the fund to recalibrate quickly to rising markets without being locked into stale positions.
“Every quarter end, we will end up rolling into a new one-year put protection,” Galecki says. “That’s what allows us to move with the market and have that protection in place as the market’s moving up.”
Regarding the pacing of call sales: “The frequency is because we think it’s a sweet spot based on our research,” he notes. “We don’t want the market to move too quickly and us being locked in for upside potential.”
By keeping the call options on a two-week cycle instead of monthly or longer, the strategy seeks to more quickly capture rising equity markets—resetting strike prices higher as gains occur rather than missing out on additional upside.
The laddered approach is designed to enhance the ETF’s ability to stay responsive to changing market conditions while maintaining the guardrails that many risk-conscious investors demand.
A Model-Friendly Solution for Modern Portfolios
Defined Outcome ETFs™, while powerful, have often posed implementation challenges in multi-account households or model portfolios. Because performance is tied to fixed start and end dates, allocating midcycle can dilute the intended exposure. BFRZ’s strategy may solve this timing concern by offering a continuous entry point with consistent one-year buffers, regardless of when an advisor allocates to the strategy.
With traditional funds in this asset class, “you can’t just allocate money into them on a random basis without possibly having an experience that is outside of what the outcome parameters are,” Galecki points out. “So, this helps solve that—advisors could put the money to work as they see fit.”
Such operational ease gives BFRZ strong utility in fee-based advisory practices, especially those managing client capital with discretion and on an ongoing basis.
Growing Advisor Interest in BFRZ
Although the ETF launched in May, initial advisor reception has been promising—particularly among those already familiar with Innovator’s buffered lineup or Parametric’s systematic expertise.
“We already have advisors that are using some of our strategies that are sub-advised by Parametric,” Galecki says. “For those folks, they’re already comfortable with Parametric. The easiest lift for us is having those advisors experiment with this and getting comfortable around this approach.”
Galecki emphasizes that BFRZ is still early in its rollout, but Innovator is optimistic about its potential role in advisor toolkits, especially in uncertain markets where capital preservation is a priority and abandoning upside altogether is not an option. “We’re really excited about the enthusiasm so far,” he adds.
Why BFRZ Matters for Risk-Aware Allocators
For financial advisors seeking to protect client capital without retreating from equity exposure, BFRZ offers a differentiated option. It seeks to remove the complexity of market timing, target zero downside, and still participate in market upside—all in a liquid, tax-efficient2 ETF wrapper.
By laddering one-year puts and funding them with short-dated calls, the strategy is designed to increase flexibility and provide clear targets advisors may plan around.
With inflation, rate uncertainty, and recession fears lingering, buffered strategies are no longer niche—they’re becoming core. Advisors ready to meet those concerns head-on might find that BFRZ offers a thoughtful, accessible, and model-friendly approach to managing risk without giving up on growth.
1 Buffers and caps are stated gross of fees and expenses. Investors must be willing to hold Defined Outcome ETFs™ for the duration of their Outcome Period.
2 ETFs use creation units, which allow for the purchases and sale of assets in the funds collectively. Consequently, ETFs usually generate fewer capital gain distributions overall, which can make them somewhat more tax-efficient than mutual funds.
__________________________
Additional Resources
__________________________
Disclosures
Volatility: A statistical measure of the dispersion of returns for a particular asset or index. Option: The right to buy or sell a particular security at a specified future date at an agreed upon price. Put: An option contract that provides the buyer the right (but not the obligation) to sell a specified amount of an underlying security at a predetermined price. Covered Call: A strategy that involves holding a long position in a security and selling a call option on that security in seeking to realize additional income from the option premium. Tranche: A portion of a larger options portfolio separated by expiration date. Solactive GBS United States 500 Index: An index that seeks to tack the returns of the 500 largest U.S. companies, as measured by market capitalization.
The Fund seeks to achieve its investment objective by purchasing a series of put option contracts with “laddered” expiration dates, up to a year, that are three months apart. The Fund will also systemically sell short-dated call option contracts, which have an expiration date of approximately two weeks, with an objective of funding the purchases of put option contracts.
The Fund’s purchased put option contract strategy seeks to reduce the risks associated with typical long-only equity strategies by providing investors with the potential for downside protection against losses experienced by the Fund’s equity portfolio; however, such protection is not guaranteed. The Fund’s options portfolio is structured to seek to provide the Fund with 100% “buffers” (i.e., protection against 100% of losses) that are implemented on a quarterly basis against Equity Portfolio losses over the term of the specific put option contract. The sought-after 100% buffers will not change during the period and is provided at the expiration of the specific put option contract. The put option contracts utilized by the Fund will utilize strike prices that are either at-the-money or are up to approximately 110% of the then-current value of the U.S. large-cap index. The Fund utilizes in-the-money put option contracts to help provide additional sought-after protection to the Fund in the event the U.S. large-cap index has appreciated in value since the execution of the original put option contract.
In light of the laddered put option contracts utilized to implement the 100% buffers, the Fund targets an annual maximum loss of approximately 1% to 3%, which is not guaranteed. Given the nature of put option contracts used, the strategy has the potential to generate positive returns in negative and very negative market environments. Any such positive returns are not guaranteed. The Fund seeks to participate in approximately 40% to 50% of the annual returns of the Equity Portfolio Index as a result of the implementation of the Fund’s purchased and sold option contracts, which is not guaranteed.
As a result of the laddered put option contracts and sold call option contracts, the Fund expects that it will experience approximately 25%–30% of the annualized volatility experienced by the U.S. Large Cap Index, which is not guaranteed.
There is no guarantee the Fund will be successful in providing the sought-after protection of the buffers. The Fund’s option strategy may cause the Fund to forego a portion of any upside returns of the Equity Portfolio.
The Fund seeks to provide a series of “buffers” that each aim to protect the Fund against 100% of losses experienced by the U.S. large-cap index, as measured at the end of one-year periods and before fees and expenses. The implementation of the buffers is not guaranteed. As a result of the Fund’s laddered investment approach, on an ongoing basis the Fund will experience investment buffers that are expected to be greater or less than the 100% buffer sought-after by an individual Options Portfolio.
The Fund seeks to provide capital appreciation while seeking to limit the amount of losses experienced by investors. The Fund does not provide principal protection or non-principal protection, and an investor may experience losses on its investment. In a market environment where the Equity Index is generally appreciating, the Fund may underperform the Equity Index and/or similarly situated funds. The Sub-Adviser will seek to “ladder” the Fund’s option contracts by entering into a new purchased put option contract packages every three-months. After a put option contract expires, the Fund will enter into a new put option contract with one-year expiration date that are staggered every three months. Because the Fund ladders its option contracts and due to the Fund’s put option contracts having different terms (including expiration dates), different tranches of put option contracts may produce different returns, the effect of which may be to reduce the Fund’s sought-after protection. Therefore, at any given moment the Fund may not receive the benefit of the sought-after protection on losses that could have been available from an Options Portfolio with a single expiration date. An investment in the Fund could involve significant risks not associated with an investment in bonds. The Fund is not equivalent to bonds.
FLEX Options Risk. The Fund will utilize FLEX Options issued and guaranteed for settlement by the Options Clearing Corporation (OCC). In the unlikely event that the OCC becomes insolvent or is otherwise unable to meet its settlement obligations, the Fund could suffer significant losses. Additionally, FLEX Options may be less liquid than standard options. In a less liquid market for the FLEX Options, the Fund may have difficulty closing out certain FLEX Options positions at desired times and prices. The values of FLEX Options do not increase or decrease at the same rate as the reference asset and may vary due to factors other than the price of reference asset.
Investing involves risk. Loss of principal is possible. Innovator ETFs® are distributed by Foreside Fund Services, LLC.
Fund’s investment objectives, risks, charges and expenses should be considered carefully before investing. The prospectus and summary prospectus contain this and other important information, and it may be obtained at innovatoretfs.com. Read it carefully before investing.
The following marks: Accelerated ETFs®, Accelerated Plus ETF®, Accelerated Return ETFs®, Barrier ETF®, Buffer ETF™, Defined Income ETF™, Defined Outcome Bond ETF®, Defined Outcome ETFs™, Defined Protection ETF®, Define Your Future®, Enhanced ETF™, Floor ETF®, Innovator ETFs®, Leading the Defined Outcome ETF Revolution™, Managed Buffer ETFs®, Managed Outcome ETFs®, Step-Up™, Step-Up ETFs®, 100% Buffer ETFs™ and all related names, logos, product and service names, designs, and slogans are the trademarks of Innovator Capital Management, LLC, its affiliates or licensors. Use of these terms is strictly prohibited without proper written authorization.
Copyright © 2025 Innovator Capital Management, LLC. All rights reserved.
