Investors Flock to Buffer ETFs as Market Dynamics Shift

Investors are increasingly turning to defined outcome, or “buffer,” exchange-traded funds (ETFs), with a total of approximately $78 billion invested across 420 such funds by the end of 2025. Despite the growing popularity, success among providers is uneven. Notably, only 19 of these ETFs exceeded $1 billion in assets, while 191 held under $50 million. The two largest providers, Innovator and First Trust, control a significant 86% of the market share, offering all of the largest defined outcome ETFs.

According to Morningstar’s recently released Guide to Defined Outcome ETFs, the report offers insights into how investors can maximize their potential returns. The guide also includes concise overviews of the largest buffer ETF providers. Readers interested in a deeper understanding can access the full report through Morningstar’s website.

Leading Providers in the Buffer ETF Market

At the forefront is First Trust, which manages nearly $40 billion across 110 defined outcome ETFs. This figure represents about half of the total assets in the buffer ETF category and a quarter of all available ETFs. Pioneering the buffer ETF concept, First Trust’s sub-advisor, Vest Financial, launched the first mutual fund with an explicit buffer strategy in 2016. Of its offerings, 67 employ a standard buffer structure, while 76 track the performance of the S&P 500 index. First Trust has leveraged its early market entry to set relatively high fees, averaging 0.88% annually, which is the highest among the eight firms reviewed.

Following closely is Innovator, which has approximately $27.5 billion in assets spread across 135 ETFs. The firm is poised for further growth following an announcement on December 1, 2025, of its acquisition by Goldman Sachs, expected to finalize in the second quarter of 2026. Innovator’s products predominantly use standard buffer structures tied to the S&P 500, with an average fee of 0.80%.

Additional Key Players in the Market

Allianz, a seasoned insurer and asset manager, offers 49 defined outcome ETFs, all referencing the S&P 500, with an average fee of 0.74%. Their deep understanding of the buffer structure, rooted in insurance products, positions them well in this evolving market.

Another notable player is AllianceBernstein, which operates efficiently with just three defined outcome ETFs. Despite the limited range, they are the fourth-largest provider, charging an average annual fee of 0.69%. Their flagship products include the AB Conservative Buffer ETF and the AB Moderate Buffer ETF, which provide varying degrees of loss protection tied to the S&P 500.

Pacer has successfully utilized a fund-of-funds structure, exemplified by its flagship product, the Pacer Swan SOS Fund of Funds ETF. This ETF offers investors exposure to a diverse set of buffer ETFs while charging an average fee of 0.61%. Investors are drawn to the flexibility this structure provides, allowing for more strategic entry and exit points.

In the growing market, iShares, a division of BlackRock, has ambitious projections, anticipating “Outcome ETF” assets could reach $650 billion by 2030. Their offerings include standard buffer ETFs and unique products aiming to protect 100% of downside risk.

On the innovative side, Calamos distinguishes itself by not offering standard buffer structures. Instead, it provides Structured Alt Protection ETFs aimed at fully protecting against losses on various reference assets, including the S&P 500 and Bitcoin. They charge an average fee of 0.69%.

Finally, PGIM is rapidly expanding, with 38 of its 43 defined outcome ETFs linked to the S&P 500. They have adopted a competitive pricing strategy, charging 0.50% annually.

As the defined outcome ETF market evolves, new offerings are emerging that deviate from traditional structures. These innovations may not feature explicit buffers or fixed outcome periods, aiming to provide investors with greater flexibility. The market’s growth trajectory suggests that providers will continue to innovate to meet investor needs, particularly as demand for predictability and defined outcomes remains strong.

The recent performance during the “Liberation Day” in April 2025 underscored the resilience of these products. Most defined outcome ETFs outperformed the S&P 500 during this volatile period, reinforcing their appeal. Investors are likely to prioritize these defined outcome ETFs, particularly in uncertain market conditions.