Goldman Sachs Asset Management has bought two exchange-traded fund businesses in a row, Innovator and then NEOS, and both sit in categories growing at 40% and 80% a year.
The firm is not short of a balance sheet or of people who can build a fund, which is what made Dominic Chu's question the right one: why buy rather than build. Bryon Lake's answer is that Goldman is doing both, and that buying compresses the timetable.
"It just accelerates us down the path a little bit further."
Lake is chief transformation officer at Goldman Sachs Asset Management and co-head of its third-party wealth business. Pedro Palandrani runs product research and development at Global X, the firm that launched a thematic ETF in 2010 and an artificial-intelligence ETF in 2018, four years before ChatGPT.
I listened to the full episode so you can skip it. 30 minutes of audio, 12 minutes of reading.
Here are the 12 takeaways that matter.
👤 Guests: Bryon Lake, chief transformation officer at Goldman Sachs Asset Management and co-head of its third-party wealth business; and Pedro Palandrani, head of product research and development at Global X
🎙️ Host: Dominic Chu, who presents the ETF Edge podcast for CNBC
📰 Published: 31 August 2026 on ETF Edge
🟣 Apple Podcasts | ⏱️ 30 min | ✅ Time saved: 18 min
Key Takeaways
Goldman bought its way into the two fastest-growing active ETF categories
Derivative income has grown 80% a year for five years, defined outcome 40%
Lake says the firm is building organically too, and the deals only shorten the timetable
The concentration of the index is what is driving demand for targeted funds
Palandrani puts 35 to 40% of the S&P 500 in a handful of names
The innovation is not the strategy, it is who now gets to use it
Covered calls and defined outcome were institutional or insurance-company tools before the ETF wrapper
Income buyers now want to know the number in advance, not just the yield
Target distribution rates, and distributions that have moved from annual to weekly
2022 was the stress test these products have already passed
The defined outcome category tripled in size that year
There are more than 5,000 ETFs, which is more than there are listed stocks
Rule 6c-11 made launching one easy in 2019; gathering assets is the hard part
Thematic funds sell because clients can hold a conversation about them
Palandrani calls it conversational alpha, at 2 to 5% of a portfolio
The next Global X theme is a component inside the AI supply chain, not an AI company
Multi-layer ceramic capacitors, which manage power draw on GPUs and CPUs
1. Buying Instead of Building
Chu opened on the acquisitions: Innovator first, then NEOS, both of them in a particular kind of ETF. Why buy them when Goldman has the balance sheet and the people to build?
Lake's framing is that Goldman sells solutions rather than products. The firm leads in separately managed accounts and direct indexing, has an alternatives platform with evergreen private assets, and runs active ETFs
His answer to the build-or-buy question was that it is not a choice. "I mean, to really answer the question, we're doing both." The organic platform has kept growing and the two acquisitions align with a strategy already under way
"It just accelerates us down the path a little bit further."
The fit he described is cultural as well as commercial. Both Innovator and NEOS are what he called client-led organizations with differentiated products
What the two deals buy is category leadership in two places. Defined outcome — funds that set a known range of outcomes over a period — through Innovator, and derivative income through NEOS
2. Where the Flows Went
The number Lake used to size the opportunity is this year's flow into ETFs.
The flow figure is a record and the year is not over. "ETFs have seen about $1.2 trillion dollars of net flows this year alone already setting a record probably on pace to close to two trillion dollars in net assets this year"
What matters to him is the mix underneath it. Investors are moving into active ETFs that deliver an outcome different from a traditional index fund
Goldman's own structure follows that split. A legacy ETF business delivering its active capabilities through the wrapper, plus the two acquired ranges in defined outcome and derivative income
3. Concentration and Targeting
Chu turned to Global X, which built its business on thematic and active products rather than broad index funds, and asked what has changed for issuers.
Palandrani's claim is that the demand is for precision. "Innovation is in the DNA of GlobalX." The firm launched its first covered-call strategy in 2013, a passively managed Nasdaq-100 covered-call fund
The reason he gives for targeted exposure is what has happened to the benchmark. "We're seeing now in the market, a lot of concentration, whether that's looking at equities, with, looking at the S&P 500, 35 to 40 percent of the S&P 500 is concentrated in just a handful of names."
"So investors are looking for diversification through targeted exposure."
The themes he named are the ones missing from the large benchmarks — defense technology, data centers, electrification — which he says are underrepresented and let an investor express a view in a narrower way
4. Why Income Demand Rose
Chu pushed on whether the appetite for income is a demographic shift or something more cyclical.
Palandrani read it as an adaptation to the last five years. Volatility in fixed income and a long stretch of low rates pushed investors to look for higher sources of income, which is where the covered-call conversation starts
The trade being made is to keep the equity exposure and add yield on top of it, rather than to leave equities
Defined protection sits alongside it as the other half of the same demand
Beyond income, the pull is toward diversification through themes, which is the same argument he made about concentration
5. From CDs to Streaming
Chu's harder question was about competition: with both firms selling similar strategies, what makes any of these businesses viable?
Lake's answer separates the wrapper from the strategy. The ETF is a delivery mechanism — intraday trading, transparency, tax efficiency — and that is what makes it worth using
"I think about it as like making the leap from CDs to streaming music. It's so convenient and it gives you control."
The strategies themselves are old; the access is new. Defined outcome and income strategies existed at institutional level, or inside an insurance company's general account
"What we're doing now is the innovation where we're democratizing these types of strategies delivering it through the ETF wrapper and then making it available to investors through that democratization."
He gave two worked uses. A defined outcome fund such as BALT as a buffer, after investors were disappointed by how fixed income diversified portfolios in 2022; and a premium income ETF where the income used to come from dividend strategies
Palandrani's addition is a chronology. For the first three decades the industry gave access to stocks, bonds and commodities; more recently the wrapper has taken in private credit and private equity exposure, autocallables, and now filings for prediction markets
Global X launched its artificial-intelligence ETF, AIQ, in 2018 — "That was four years before the ChatGPT moment."
6. More ETFs Than Stocks
Chu noted that there are now more ETF tickers than single stocks listed in the US, and asked whether the trend toward hyper-specific products with an options overlay keeps going.
Palandrani's answer was unqualified. "And look, yes, there are over 5,000 ETFs today in the marketplace, more than stocks like you just mentioned."
He credits the regulation as well as the demand. Chu's framing was that the rules changed to let a product reach market more efficiently, and Palandrani returns to that point later in the episode
The demand he expects to persist is equity exposure with a higher degree of income, including single-stock and small-basket products with options written over them
7. Income You Can Predict
The distinction Palandrani draws is between a high yield and a knowable one.
What clients now ask for is certainty about the amount. Investors understand options in a way he says they did not five years ago, and what they want on top of that is a level of certainty about what the income will be
That is what a target distribution rate is for. Global X is focusing on target income and target distribution rate strategies so investors know what is coming
The lever is the call-writing ratio: write less of the position to generate less income, more to generate more
"But having that target distribution rate is something important for investors today."
The frequency has compressed in one direction. "We've seen that coming from annual distributions to now, even like weekly distributions." Global X introduced a covered-call range with a weekly distribution this year
Tax certainty is the next thing clients ask about, and he argues a transparent vehicle is where that can be answered
8. The 2022 Stress Test
Chu's sharpest question was that these products have not been through a market break, and that derivative-based instruments have historically been blamed for volatility.
Lake rejected the premise. "I think I'd challenge the premise that we haven't had volatility."
"So, for example, the defined outcome category tripled in size during 2022 when you saw the major benchmarks off pretty substantially as investors looked for ways to protect their portfolio or maybe buffer to the downside."
"The strategies themselves have been battle tested." — even where they had not yet been wrapped in an ETF
His argument for the income products is that the premium is itself the buffer. The option premium provided downside protection against the benchmark in 2022
He then inverted the question about performance. "They don't look at an arbitrary January 1st to December 31st return." Investors are asking whether the income sustains the thing they are buying, or whether they can save enough to retire or buy a first home
The current use case he hears most is getting invested at all. With headlines rocky and markets near highs, a defined outcome fund is being used as an on-ramp, including by investors sitting on too much cash
9. What Goldman Wants Next
Chu's last question to Lake was where the firm goes from here.
The growth rates are the answer. "Derivative income is the fastest growing active ETF category, 80% a year for the last five years. Defined outcome, 40% a year for the last five years."
Goldman now claims the largest range of defined outcome ETFs, through the Innovator capabilities, and what Lake called one of the most complete income ranges once NEOS is folded in
The third leg is the firm's own active capabilities delivered through the wrapper, which is where the organic half of the strategy sits
Chu's summary, which Lake did not dispute: the tilt stays on income generation and derivative strategies
10. Launching Is Easy Now
For the second half, Palandrani stayed on alone, and Chu asked him whether building or buying is the better route.
His answer is that Global X has grown organically and that the two routes are not exclusive. The firm has launched its own funds and then found the markets and investors for them
He reads the industry's M&A as a symptom of how the economics work now. "You know, after 6c-11 in 2019, it's really easy for an ETF issue to launch an ETF."
"What's really hard is to get assets to this ETF."
Which is why he puts the emphasis on distribution. Having high conviction on a strategy is necessary; working with clients and educating them on what a thematic or derivative income product does is what turns it into assets
Global X's own scale: more than 100 ETFs and close to $100 billion in total assets under management
11. Conversational Alpha
Chu asked what actually makes a product get distributed, beyond having a story to sell.
Palandrani's term for it is conversational alpha. Thematic ETFs work because the concepts are relatable — investors understand artificial intelligence, and they understand what is happening in defense technology
"We call that conversational alpha, and we work with many advisors out there where we see them using many of these tools as a way to have conversations with their own clients."
The position sizes are small and the airtime is not. He puts thematic strategies at 2, 3 or 5% of a 60/40 portfolio, and says most of the client conversation happens on that slice
What that requires from the issuer is research rather than marketing. Identifying a high-conviction area, defining an investable universe of companies, and building for a horizon he puts at five, 10 or 15 years
"We're not looking at short-term cyclical trends within the economy."
12. The Next AI Bottleneck
The last stretch was what Global X has in the hopper.
The pattern he is repeating is the one AIQ established. "AIQ is now one of the largest artificial intelligence ETF in the United States." — launched in 2018, four years before the shift in 2022
Since then the firm has moved down into verticals — data centers, electrification and the power needed to support AI, and more recently semiconductors
"Artificial intelligence AI is here to stay." His view is that this is still the early development phase, and that it is showing up in the revenue, profitability and adoption numbers of the larger companies
The next product is a component, not a company. He named capacitor technology and multi-layer ceramic capacitors, an area within semiconductors that helps GPUs and CPUs manage power efficiently
The pitch is a concentrated group of companies supplying a bottleneck, and he said something on that theme is likely from Global X in the weeks to come
Bonus Insights
Global X's list of firsts is the argument it makes for itself. A thematic ETF in 2010, which was lithium and battery technology, before electric vehicles were a mainstream product; a social media ETF in 2011; a covered-call ETF in 2013; and AIQ in 2018
On competition, Palandrani opened with a concession. "Well, first of all, we welcome competition." His argument is that it grows the industry and serves investors better
What he tells investors to do about it is to "double click" on funds whose names look identical, because the holdings are where they differ
Chu's own framing of why the industry has changed is that regulation now lets a product reach market in a more streamlined way, and that hyper-specific investor demand has replaced a market where the choice was an index fund or a leveraged version of one
The through line both guests describe is that the ETF wrapper has stopped being a way to buy the market cheaply and become a way to buy a specified outcome — which is why the fastest-growing categories are the ones that promise a number rather than an index, and why Goldman was willing to buy two of them rather than wait.
Products, Companies & Tools Mentioned
Goldman Sachs Asset Management (Bought Innovator and then NEOS to lead the defined outcome and derivative income categories, alongside its own active ETF range)
Innovator and NEOS Investments (The two acquisitions: defined outcome funds and derivative income funds, both client-led firms in Lake's description)
Global X (More than 100 ETFs and close to $100 billion under management, built organically on thematic and covered-call products)
AIQ (Global X's artificial intelligence ETF, launched in 2018 and now, Palandrani says, one of the largest AI ETFs in the United States)
BALT (The Innovator defined outcome ETF Lake names as an example of using a buffer where fixed income disappointed in 2022)
S&P 500 and Nasdaq-100 (The two benchmarks the conversation runs on: the concentration argument and the underlying for the 2013 covered-call fund)
Rule 6c-11 (The 2019 ETF rule Palandrani credits with making a launch easy, which is why distribution rather than product is now the constraint)
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