To The Moon

The fund company Innovator has launched an ETF(TJUL) that tracks the S&P 500, claiming to provide investors with 100% protection against losses in SPY over about two years. At the same time, it has a capped upside return, offering a maximum pre-expense yield of 16.62%.

The world's first ETF with 100% loss protection was introduced in the United States on Tuesday. The Innovator Equity Defined Protection ETF (TJUL $INNOVATOR EQUITY DEFINED PROTECTION ETF - 2 YR TO JULY 2025(TJUL)$ ) takes the increasingly popular concept of Buffer ETFs to the extreme. The ETF began trading on Tuesday under the ticker symbol “TJUL”, with an annual management fee of 0.79%. At least 80% of the fund's net assets are invested in options tracking the SPDR S&P 500 ETF Trust (SPY), which tracks the S&P 500 Index.

This product comes from Innovator Capital Management, which launched the first so-called Buffer ETF in 2018, sometimes also known as Defined Outcome Funds.

As the name suggests, buffer funds provide a buffered stock exposure by limiting investors' downside risk while also restricting their upside potential. Bloomberg data shows that since their introduction, these products have attracted significant interest from major industry players such as BlackRock Inc., the world's largest ETF issuer, collecting approximately $5 billion in inflows this year alone.

According to Innovator, the TJUL fund sets an industry precedent by offering investors a maximum of 16.62% fee-adjusted yield due to SPY's rise, while providing 100% downside protection for any losses during the period. TJUL achieves this by hedging against market volatility using a combination of call and put options.

TJUL is another buffer fund introduced by Innovator. Such funds offer loss protection to investors but come with a capped return. Therefore, regardless of how high the S&P 500 rises, such as a 30% increase over two years, TJUL investors can only obtain a pre-expense yield of 16.62%, resulting in a maximum return of about 15% after deducting fees.

Innovator emphasizes that it cannot guarantee TJUL's ability to provide 100% downside protection and points out that any appreciation in the ETF after its launch will not be protected. This means that investors may face losses until the ETF falls back to its initial issue price.

Graham Day, Chief Investment Officer of Innovator, stated that the company found strong demand for this risk exposure from a market with significant cash flows, such as fixed income annuities. Their goal is to offer customers a way to stay in the market with strong built-in risk management. For the first time ever, investors will have access to the stock market with a product that has 100% built-in buffer.

Innovator claims that as of July 17th this year, its more than 50 buffer funds have managed assets exceeding $13 billion. The largest investment tools include the Innovator S&P 500 Power Buffer ETF (PAPR) with assets totaling about $687 million, and the Innovator S&P 500 Power Buffer ETF (PJUL) with assets totaling about $834 million. As of this year, these ETFs have risen by approximately 11% and 15%, respectively, while the S&P 500 Index has gained around 18%.

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