Defined outcome, or buffer, ETFs could grow fivefold to $334 billion in AUM by 2030 from just $69 billion today, according to a white paper published by Cerulli Associates.
Cerulli estimates that such factors as greater demand by advisors’ baby boomer clients and an acceleration of home-office approvals by large broker/dealers could lead to an annual growth rate of between 29% and 35% for defined outcome ETFs over the next five years. The pace would be at least twice the projected growth in the ETF space at large.
One of the main advantages of defined outcome ETFs is that they offer investors downside risk protection, typically covering their first 10% to 15% of losses. They also serve as a volatility hedge and can boost equity market growth exposures for clients nearing retirement age, Cerulli researchers note.
These features are particularly attractive to advisors’ baby boomer clients as more of them approach retirement, according to the firm. Cerulli’s survey of 3,500 affluent investors, administered in September 2025, found that as investors age, they give far more weight to downside protection than to outperforming the market when choosing mutual funds and ETFs. For example, 61% of investors aged 50 through 59 gave preference to downside protection compared to just 39% among those under 30. By the time investors reach the age of 70, 83% become more concerned with downside protection.
Meanwhile, advisors like the liquidity and tax efficiency offered by defined outcome ETFs compared to other frequently used risk management products such as structured notes and variable annuities.
The increased use of packaged investment products such as model portfolios could accelerate advisors’ reliance on defined outcome ETFs, allowing them to customize the funds’ use based on clients’ risk tolerance and investment time horizons, Cerulli forecasts.
“Defined outcome ETFs” may fit naturally into this investment framework, offering a scalable yet customizable approach to portfolio construction through the sheer breadth choices available to advisors,” the firm’s researchers wrote.
Meanwhile, while broker/dealers and wirehouses have not yet broadly used defined outcome ETFs, executives told Cerulli in conversations that they are getting increasing inquiries from pre-retirement age investors about these products. Some of the roadblocks to these channels adapting defined outcome ETFs so far have to do with their greater complexity compared to traditional equity ETFs, as well as the variability of outcomes depending on when a client invests in or exits such funds.
In addition, while CFRA Research supports the hypothesis that defined outcome ETFs will see from $15 to $20 billion in annual net inflows over the next few years, its overall projections are more modest than Cerulli’s. The firm estimates that by 2030, defined outcome ETF’s AUM will reach roughly $250 billion. CFRA estimates their current AUM at $78.5 billion.
“We expect 2026 to be a favorable year for buffer ETFs strategies. On the fixed income side, there is currently over $7 trillion in money market funds, which could move back into defensive equity strategies as rates fall. On the equity side, valuations of AI stocks are stretched and volatility is increasing, which could also demand for safety,” wrote Aniket Ullal, senior vice president of research and analytics at the firm.
Likewise, Zachary Evans, an analyst at Morningstar, noted that the $334 billion AUM projection by 2030 is quite ambitious. While he expects buffer ETFs to continue to gain investors, to reach that figure in that timeframe, the sector would have to see significant inflows, as well as post a great performance. But “there are other solutions out there that may suit a client’s need better.”
Evans added that most buffer ETFs come with expense ratios of 0.7%, which are several hundred basis points higher compared to traditional ETFs.
Cerulli based its findings on conversations with 3,500 financial advisors and home-office executives that took place in the third quarter of 2025. The firm also incorporated the results of its annual financial advisor survey, which included responses from over 2,000 advisors across multiple industry channels.
