Goldman’s Latest Acquisition Is a $2 Billion Bet on Active ETFs

CEO David Solomon has said there is a “very, very high bar” to make an acquisition in Goldman Sachs’s asset- and wealth-management business. (Michael Nagle/Bloomberg)

Key Points

• Goldman Sachs is acquiring Innovator Capital Management for approximately $2 billion to expand its ETF offerings.
• Innovator Capital Management specializes in defined-outcome ETFs, with $28 billion in assets under supervision across 159 funds as of September.
• This acquisition follows two other significant deals in Goldman Sachs’ asset-management division in recent months.

Goldman Sachs is acquiring an Illinois-based money manager for $2 billion, a move that meaningfully expands the bank’s actively managed exchange-traded fund offerings and builds on several months of deals by its asset-management business.

The firm said Monday it would buy Innovator Capital Management, a 60-person company that specializes in actively managed defined-outcome ETFs, also known as “buffer” ETFs because they aim to mitigate market losses by using options contracts.

Goldman is betting investors will be willing to pay up for those funds in the current era of cheap, plentiful ETF options. The average ETF and mutual fund expense ratio was 0.34% in 2024, which has fallen significantly over two decades, according to Morningstar. The average expense ratio for buffer ETFs, which are generally more complex to manage, is about .80%.

Fund providers tout buffer ETFs’ downside protection in volatile markets. Criticisms center on the funds’ higher fees and how their structures could cause investors to leave gains on the table.

Marc Nachmann, Goldman’s global head of asset and wealth management, said he views the products as one element in a larger portfolio for investors. They can offer results similar to structured notes or variable annuities, but in a more broadly accessible, flexible form, he said Monday.

“The criticism generally comes from hedge fund providers, and I think they usually pride themselves on also providing some kind of a buffered outcome. A lot of the hedge funds are thinking about, ‘I’m generating for you high-single-digits returns with less volatility than if you do it in the market.’ That’s exactly what this is,” Nachmann said in an interview. “If you have a buffer, you get more consistent returns and less volatility around them, but you are giving up some upside.”

Innovator was founded in 2017 by Bruce Bond and John Southard, who founded the ETF provider PowerShares in 2003 and sold it to Invesco in 2006. Bond and Southard will join Goldman as senior advisors, while senior executives Graham Day and Trevor Terrell will join as partners, Nachmann said.

Innovator and a rival, First Trust, dominate the buffer ETF market. The space has ballooned as other money managers, including Goldman and BlackRock, have launched their own in recent years.

Hedge funds such as AQR Capital Management and traditional asset managers have written about the products’ downsides as investors pile into them.

“Buffer ETFs can smooth out moderate market swings, but the cost of protection and their restrictions on upside gains often hold back returns,” Russell Investments strategists wrote in October. “Depending on risk tolerance, investors may prefer either a straightforward de-risking strategy or the built-in protection of a buffer ETF.”

Goldman Sachs Chief Executive Officer David Solomon has made the bank’s asset- and wealth-management business a centerpiece of his growth strategy. On a call with analysts to discuss quarterly earnings in October, Solomon said that if his team sees “something that could accelerate our journey in asset and wealth management, we certainly consider it, but always with a very, very high bar.”

Nachmann has overseen two other big deals this year: the acquisition of a venture-capital firm in October, and a new partnership with the asset manager T. Rowe Price in September.

Bryon Lake, who left JPMorgan Chase last year to join Goldman as a top asset-management executive, has known Innovator’s team for years. Earlier in his career, he worked at PowerShares and, after its sale, at Invesco.

Innovator has $28 billion of assets under supervision across 159 defined-outcome ETFs, while Goldman offers some 215 ETF strategies, accounting for more than $75 billion in assets under supervision. The companies expect the deal to close in the second quarter of 2026.

Write to Rebecca Ungarino at rebecca.ungarino@barrons.com