Shifting advisory models and investor demographics favor solutions that offer predictable returns and personalized risk management at scale
New research from Cerulli and Innovator ETFs finds that significant tailwinds such as home-office approvals at large broker/dealers could accelerate asset growth in the Defined Outcome exchange-traded fund (ETF) category to a 29% to 35% five-year compound annual growth rate (CAGR). Download the full report here.
November 19, 2025, BOSTON—New Cerulli research finds that significant tailwinds such as home-office approvals at large broker/dealers could accelerate asset growth in the Defined Outcome exchange-traded fund (ETF) category to a 29% to 35% five-year compound annual growth rate (CAGR). In the more optimistic scenario, Defined Outcome ETFs™ are projected to more than quadruple over a five-year period, reaching more than $334 billion assets under management by 20301. If achieved, this growth would significantly outpace the growth of the broader ETF industry, which is expected to grow at a 15% rate during the same period, according to the white paper, The Future of Outcome-Based Investing: How Defined Outcome ETFs™ Are Poised for Rapid Growth, released in partnership with Innovator Capital Management, LLC (Innovator).
The rapid growth of Defined Outcome ETFs™ aligns with a broader transformation in the wealth management industry. Advisors are moving toward fee-based advisory models that emphasize scale and personalization and they are adopting products that align with both objectives. At the same time, a growing segment of Baby Boomers (who control $48 trillion, more than half of investable assets in the U.S. market) are entering retirement, transitioning from asset accumulation to decumulation. As they transition, Cerulli believes there will be increased demand for predictability, downside protection, and flexibility, reshaping how advisors approach risk management. “Traditional risk mitigation strategies offer diversification and stability, yet they often fall short on providing the certainty that clients increasingly seek,” says Daniil Shapiro, director.
The research outlines several use cases important to advisors and focuses on how each applies to wealth managers.
Defined Outcome ETFs™ aim to offer the following characteristics:
- Volatility Dampener: Provides a level of certainty to clients based on buffer level if held for the entire Outcome Period, potentially helping risk-averse clients remain invested by dampening volatility
- Downside Risk Protection: Offers a level of downside protection for advisors aiming to manage cash flow. In exchange, shareholders forego gains beyond the stated cap.
- Market Participation: Boosts potential equity market growth exposures, up to a cap, for near-retirement age clients overweighted to fixed-income sleeves; however, prospective investors should be willing to hold shares for the entire outcome period in order to achieve the stated outcomes
- Cost Effectiveness: Lower cost compared to structured products
- Enhanced Liquidity: Increases liquidity through the ETF wrapper compared to legacy downside protection products, such as structured notes
The wide range of buffer levels and upside exposures offered by Defined Outcome ETFs™ enable advisors to tailor strategies to each client’s needs. “As market uncertainty persists and investor expectations evolve, Defined Outcome ETFs™ have emerged as a dynamic solution for delivering personalized risk management at scale. Advisors increasingly turn to these products to offer more predictable outcomes and help clients remain invested, especially those concerned about volatility and downside risk,” comments Graham Day, EVP, CIO of Innovator.
Advisors consistently highlight the behavioral benefits of Defined Outcome ETFs™ in helping clients remain invested during periods of market volatility; however, home-office executives cite concerns such as product complexity and slowing platform adoption. For example, should an investor purchase ETF shares that have appreciated since the start their outcome period, they may not be able to realize the full extent of the starting cap and will be exposed to downside until the ETF has returned to its price at the start of the outcome period. “Executives want to see how these products would perform through a significant market drawdown to better understand and grow comfortable that the products would perform the way they were designed,” comments Shapiro. “Issuers that can satisfy these concerns through product innovation and advisor and home-office education will unlock a significant addressable market for the product.”
1 Source: ISS Market Intelligence Simfund, Cerulli Associates as of 11/7/2025. This estimate is based upon Cerulli’s proprietary research and has been provided for illustrative purposes only. There is no guarantee that the projections will come to fruition. For the purpose of conducting this research, Defined Outcome ETFs™ included ETFs identified as Buffer ETFs™ and equity hedge ETFs by Simfund. Two scenarios were evaluated. The optimistic growth scenario assumed that the geometric average of flows during the last 6 years of 41% would remain consistent through 2027 and incrementally regressing to the industry average. A moderate growth scenario assumed a gradual decline in the geometric average of the growth in flows from 34% (the average over the last 3 years) to the industry average of 8% by 2030. JPMorgan Capital Markets Assumptions were utilized in projecting the growth of assets. The projections herein assume that the relevant industry stakeholders and market infrastructure would continue to support the growth of this category.
About Cerulli Associates
For over 30 years, Cerulli has provided global asset and wealth management firms with unmatched, actionable insights.
Headquartered in Boston, Cerulli Associates is an international research and consulting firm that provides financial institutions with guidance in strategic positioning and new business development. Our analysts blend industry knowledge, original research, and data analysis to bring perspective to current market conditions and forecasts for future developments.
About Innovator
Innovator was established in 2017 by Bruce Bond and John Southard, founders of the PowerShares ETF lineup that has grown to be the fourth largest in the world. The listing of three Innovator Buffer ETFs™ in August 2018 marked the launch of the world’s first Defined Outcome ETFs™.
Innovator is dedicated to providing ETFs with built-in risk management that seek to offer investors a high level of predictability around their investment outcomes. Today, with more than 150 ETFs and $29 billion in AUM, as of October 31, 2025, Innovator is the industry’s leading provider of Defined Outcome ETFs™.
