Innovator Capital's Bruce Bond Weighs In on Risks, Opportunities in an 'Uncertain Market'

Chicago-based Innovator Capital Management said Monday that it’s expanding the Innovator Accelerated ETFs suite. New products will be rolled out in early 2022 and will be part of Innovator’s Defined Outcome ETF series, which now includes over 75 funds and $5.3 billion in assets.

ThinkAdvisor recently recognized Innovator Capital for excellence in Thought Leadership in its inaugural LUMINARIES program. Also winning one of the 2021 LUMANARIES award was its co-founder and CEO Bruce Bond, who started the company in 2014 with John Suthard, and was honored for Executive Leadership. Bond and Suthard founded PowerShares in 2003 and then sold it to Invesco in 2006.

Bond took some time off from his busy schedule to answer a few broad questions about his work and off-the-clock life. Here are the highlights:

1. What market indicator, industry statistic, regulatory change or advisor trend are you watching most closely right now and why?

There are probably two indicators we are watching closely right now: inflation and potential tax hikes. Mainly because those are two factors that can really impact wealth negatively.

Those seeking meaningful portfolio growth are now faced with increased risks, and those seeking protection and income (e.g., retirees) are struggling to find either in the bond markets. While market volatility can hurt a portfolio, inflation and taxes can sap portfolio value (and retirement longevity) much faster and, I think, are risks that must be addressed. 

2. How has this figure been changing recently (2021), and how do you expect it to change (2022)?

We used to wonder when inflation might hit. We no longer have to wonder. It’s here. Today, it’s more a question of what we do with it. Historically, the answer has been TIPS or other assets that have performed well with inflation.

But today’s low-rate environment has made those types of portfolio moves more difficult. For example, it may sound simple, but a 10% portfolio allocation to TIPS will only cover 10% of your portfolio from inflation! That’s not nearly good enough. While we don’t know the future, we don’t see inflation going away anytime soon.

3. What would you suggest advisors do now or consider doing in the future about it? 

We believe today’s investors must stay in the stock market but do so in a less risky way. This was a big reason for building the Innovator Defined Outcome ETFs.

Inflation ultimately moves through the stock market positively but with bouts of volatility. Buffer ETFs allow you to invest in the stock market but with a built-in buffer against downside loss.

Another, more technical note is that with these ETFs, volatility can actually be beneficial. The higher the market volatility when the ETFs’ options positions are entered into, the higher the upside potential. In our view, this market environment is excellent for these types of products. 

4. Who or what critical source of information do you track, or follow online, to keep up with this or other trends?

For us, our information sources mainly come from raw data, and then we have good people and partners help analyze and act on that data. So you can probably guess the typical culprits: Bloomberg, Federal Reserve Economic Database (FRED), realized and implied volatility data, skew, and interest rates, to name a few. 

5. Are you changing any of your work habits at this stage of the pandemic? 

We consider our people and investment products to be part of the stabilization of the economy and the financial health of our investors, as well as value-adds to the advisors who allocate client money our way.

We were well prepared to work from home as COVID-19 moved through our local community in 2020, and I’m very proud of our people’s work ethic and commitment to their families, the financial advisors we serve, and the community.

Today, our team has the opportunity to be back in the office together. We, of course, have health protocols in place, but ultimately I think our shareholders and employees have benefited from the collaborative environment that is taking place in person again. 

6. What’s your biggest hobby, and what was the last activity you did related to it?

I spend a good amount of time at the family “farm” in Northwest Illinois, where I grow grapes, fish and hunt in the company of my loved ones. It’s been a great getaway for our family. 

We’ve been fortunate to plant a vineyard on the property (with the first vintage coming of age this year!) and a fishing pond. Hunting season is in full swing right now, so we’ve been enjoying that reprieve whenever time allows.

7. How about your latest community activity?

When my partner John Southard and I sold PowerShares back in 2006, it allowed my family and me to set up a charitable foundation called the Bond Family Foundation that is still going strong today.

While we don’t publicize the work of the trust, I can say we have been fortunate to be part of some great causes, helped change many lives, and the blessings we’ve received as a family from this work far outweigh any monetary gains this world has to offer.

8. What book are you reading now and why?

I am currently reading The Sign. It is a book written by Bob Van Kampen, the late founder of Van Kampen Funds. It isn’t for the faint of heart and is more like reading a textbook. It is very insightful regarding the history and plight of the Jewish people and the signs of the end of days.  

9. Any special holiday plan you’d like to share as we near year-end? Or a New Year’s resolution?

We usually spend the holidays with our family. Our children are grown, and my wife and I are blessed with several grandkids. We’ve been trading off holidays each year — one year we get Thanksgiving with everyone, and then Christmas the next. It’s worked pretty well for us.

I’m not much of a New Year’s resolution person.

If we see a goal we want to attain business-wise, we get after it pretty quickly. To that end, we have some interesting ideas we’re working to bring to market in 2022, so I guess that could be considered a resolution.

10. Any other piece of advice or thoughts you’d like to share with our advisor audience?

Advisors have a tremendous opportunity and responsibility to grow and protect their clients’ wealth and be a clear voice in an uncertain market. The variant-laden pandemic environment has brought many challenges that have the potential to negatively impact wealth: labor shortages, supply chain struggles, inflation, high equity valuations, volatility and rising rates, to name a few.

To me, one of the best ways to manage through these risks is to own stocks, but in a risk-managed way. Until a few years ago, this was not possible for the average investor. The tools available to advisors today, exemplified by ETFs, are plenty. Now, it’s a matter of seeking out and using the right ones at the right time to solve client problems.