Goldman Sachs Asset Management is expanding its footprint in options-based ETFs, agreeing to acquire NEOS Investments, a $30 billion income-ETF specialist, deepening a buildout that began with its landmark purchase of Innovator Capital Management last year.
The combined platform from the deal will place Goldman among the top ten active ETF providers by assets, according to the company's announcement on Wednesday.
The all-in transaction, worth up to $2.25 billion in cash and equity, will fold NEOS's 19 systematic options-based income ETFs into a platform that already includes Innovator's defined-outcome lineup. Once combined, GSAM will oversee roughly $80 billion in active ETFs across a $130 billion global ETF business, a scale it claims would make it the eighth-largest active ETF provider based on figures as of June 30.
"As investor demand for active ETFs grows, NEOS' disciplined investment approach is highly complementary to our capabilities across buffer, managed outcome and income strategies," Goldman Sachs Chairman and Chief Executive David Solomon said in the Wednesday announcement. "Together, we will give investors a diverse toolkit for different market environments."
Founded in 2022, NEOS built its business on options-based income strategies designed to generate monthly cash flow with tax efficiency built into the ETF wrapper. Co-founders Troy Cates and Garrett Paolella are expected to join GSAM as partners once the deal closes, along with the rest of the NEOS team. The transaction is expected to close in the first quarter of 2027, pending regulatory approval.
Growth in derivative income ETFs has been difficult for competitors to ignore. Industry-wide, the category has swelled to roughly $180 billion in assets, expanding at a compound annual rate above 70% since 2021, according to Morningstar data cited in the announcement. That pace has outrun even the broader active ETF surge that has reshaped the wealth management landscape over the past several years.
Options income products, though, are a distinct animal from the defined-outcome ETFs, or buffer ETFs, that anchor Innovator's lineup. Where NEOS-style funds sell options to generate yield, defined-outcome ETFs use a basket of options to deliver a preset level of downside protection and capped upside over a fixed period, then reset.
Read more: Participation without panic: How outcome-driven ETF portfolios keep skittish clients invested
Goldman's decision to build out both corners of the derivatives-based ETF market in successive acquisitions suggests the firm sees advisor appetite for engineered outcomes as durable rather than a passing hedge against volatility.
That appetite shows up clearly in the numbers behind Goldman's first move into the space. When Goldman announced its roughly $2 billion purchase of Innovator last December, the deal was framed as a bet on the rapid growth of buffer ETFs, adding some 159 defined-outcome ETFs and about $28 billion in assets under supervision, and vaulting Goldman into the top tier of active ETF providers.
Research from Cerulli released around that time found that defined-outcome ETF assets could more than quadruple to upward of $334 billion by 2030, implying a five-year compound annual growth rate as high as 35% – more than double the roughly 15% pace expected for the broader ETF market. That report, drawn from conversations with more than 35 advisors and home-office executives plus survey responses from over 2,000 advisors through its Advisor Research Collaborative, found roughly three-quarters of affluent investors, 68%, say they would rather limit downside risk than chase maximum upside, and advisors describe buffer ETFs as a lower-cost, more liquid alternative to structured notes and annuities for meeting that demand.
Read more: Buffer ETFs are breaking out
Total assets in defined-outcome ETFs stood at $69 billion as of September, with Innovator and First Trust controlling more than 75% of that market between them, per Cerulli's analysis. Newer entrants including BlackRock, Allianz and Calamos are also pushing into the category, a sign that Goldman's acquisitions are as much about locking in early scale as about the underlying products themselves.
The moves also fit a broader pattern advisors have been watching closely. Active ETFs overall have climbed to roughly 12% of the $14.9 trillion US ETF market, up from just 4% in 2021, according to a new report from UMB Fund Services and FUSE Research Network.
More than half of financial advisors surveyed plan to increase their use of active ETFs over the next 12 months, versus a much weaker outlook for active mutual funds, underscoring why asset managers of Goldman's size are racing to build – or buy – active ETF shelf space rather than cede it to specialist issuers.
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