'There is a wave of generational wealth heading into the retirement stage'

Goldman Sachs announced another deal on Wednesday.

Goldman Sachs announced Wednesday that it has agreed to buy Neos Investments, adding yet another ETF shop to its fast-growing asset-management business.

Goldman Sachs $(GS)$ is paying up to $2.25 billion in cash and equity to aquire Neos, subject to certain performance goals.

The deal is the latest indication of how financial products and services catering to American retirees and older workers have become big business on Wall Street. Neos and Innovator Capital - another ETF firm purchased by Goldman in a deal that was finalized earlier this year - both cater to this rapidly growing niche.

Back in 2024, the Wall Street Journal described ETFs similar to those offered by Neos and Innovator as "boomer candy."

These funds specialize in using derivatives in ways that are particularly appealing to older, more risk-averse investors, ETF industry experts said.

Innovator Capital - now part of Goldman's asset-management arm - has 179 funds, 164 of which are considered "defined outcome" products, according to Morningstar Direct data. Defined-outcome funds use options contracts, a kind of financial derivative, to limit investors' potential losses over a given period, with the protection typically coming at the cost of a cap on gains. More than 90% of assets managed by Innovator are in these types of products, Morningstar data showed.

Neos, on the other hand, is a big player in the "derivative income" space. Derivative-income funds typically sell options to generate cash for investors, while also holding a portfolio of stocks. Only seven of Neos's 19 funds are in the derivative-income category, but these funds hold more than 80% of the firm's assets under management, Morningstar data showed.

The two categories are among the fastest growing in the broader active ETF space. ETFs using derivatives - a group that also includes popular leveraged funds intended for day traders - have accounted for roughly half of the more than 900 new funds that have been launched so far in 2026, according to data from Strategas.

As more Americans reach retirement age, these products should see plenty of growth, ETF experts told MarketWatch.

"There is a wave of generational wealth heading into the retirement stage. Positioning for those who still want upside market participation, along with income or structured outcome strategies to protect on the downside, makes sense," said Todd Sohn, chief ETF strategist at Strategas Asset Management.

Since Goldman Sachs closed on its deal to buy Innovator Capital, Innovator's funds have seen their assets under management grow by about $5 billion, according to a Goldman representative.

Both Innovator and Neos would benefit from a built-in network of wealth advisors ready to help pitch their products to consumers, Sohn said. In today's hypercompetitive ETF environment, good distribution can be critical to a fund's success.

Alternatively, investors can independently purchase these products on brokerage platforms like Robinhood (HOOD) or Schwab $(SCHW)$. It's all part of the appeal of the ETF wrapper, which offers investors tax advantages, easy access and deep daily liquidity.

Until recently, the strategies offered by these products were only available to a more select group of wealthier investors. Now, virtually anybody can access them through an ETF. It is worth noting that that products can also be lucrative for asset managers, since they typically carry higher fees than passive index-tracking funds.

For now at least, the "boomer candy" epithet appears to have stuck. But Bryon Lake, chief transformation officer at Goldman Sachs Asset Management, told MarketWatch that the appeal of these products is much broader than that nickname suggests.

Many younger investors looking for a substitute for poorly performing bonds are using derivative-income ETFs in their portfolios, Lake said, while some who are wary of a stock market now at record highs are using defined-outcome funds from Goldman's Innovator suite to manage their risk.

"We are seeing investors across the spectrum use these products in their portfolios - from early investors who are self-directed, to midcareer professionals, on up to near-retirees and postretirees," Lake told MarketWatch in an interview.

-Joseph Adinolfi