No need to fear the sharp drop in US stocks anymore? The first ETF offering 100% downside protection is listed.
The ETF with the code TJUL, issued by Innovator Fund Company, claims to provide investors with 100% protection against the decline of SPY within approximately two years, while also capping the returns with a maximum of 16.62% after deducting fees.
Innovator Capital Management, a US fund management company, has launched a new type of fund that claims to provide 100% downside protection for US stock investors, becoming the first ETF on Wall Street to offer comprehensive downside protection.
On Tuesday, July 18, Eastern Time, this fund, called Innovator Equity Defined Protection ETF, began trading under the code TJUL, with an annual management fee of 0.79%. Innovator stated that 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.
Innovator claims that the TJUL fund is an industry precedent, as it will provide investors with a cost-adjusted return of up to 16.62% due to the rise of SPY from this Tuesday to June 20, 2025, while providing 100% buffer protection for any losses during this period of SPY decline. TJUL can buffer market volatility through the combination of buying and selling call and put options.
TJUL is another so-called buffer fund or outcome fund launched by Innovator. This type of fund provides loss protection for investors at the cost of capping their returns. Therefore, no matter how high the S&P rises, if it rises 30% within two years, TJUL investors can only achieve a pre-fee return of 16.62%, and after deducting fees, the maximum return is approximately 15%.
Innovator states that it cannot guarantee that TJUL will successfully provide 100% downside protection and points out that if the ETF appreciates after its launch, any additional value will not be protected. This means that investors may face losses after TJUL appreciates until the ETF falls to its initial issue price.
As of July 17 this year, Innovator's more than 50 buffer funds have managed assets exceeding $13 billion. According to media statistics, buffer funds have attracted the largest ETF issuers such as BlackRock, attracting approximately $500 million in capital inflows since the beginning of this year.
Graham Day, Chief Investment Officer of Innovator, stated that the company has found that a significant amount of cash inflows into certain insured markets, such as fixed income annuities, indicate a demand for the risk exposure provided by TJUL. The company's goal is to provide customers with a way to stay in the market with strong built-in risk management. It will be the first time in history that investors can enter the stock market with 100% built-in buffering.