Innovator Capital Management has launched the Equity Defined Protection ETF (TJUL) on the Cboe BZX. TJUL seeks to provide the upside return of the SPDR S&P 500 ETF Trust (SPY). It has a 16.62% cap and a 100% buffer against SPY losses over a two-year outcome period.
This type of investment strategy has historically been available via bank deposits, cash, market-linked CDs, and Treasuries. However, these structures carry high investment minimums, long lockup periods, and high tax burdens.
Despite this, investors facing volatile market conditions have pumped billions of dollars into these structures. With TJUL, Innovator intends to protect investors’ portfolios against downside risk without sacrificing equity market exposure by moving to cash.
Unlike fixed indexed annuities and market-linked CDs, TJUL is expected to provide investors with a beneficial 1099 tax treatment. It also doesn’t carry bank credit risk and doesn’t require a minimum investment.
“We continue to hear that investors are looking for a way to get back into the market without sitting on the sidelines,” said Innovator CIO Graham Day, “but that the level of risk is simply too high.”
Day added that TJUL can “provide a way for our clients to stay in the market with significant built-in risk management.”
With Innovator’s Defined Outcome ETFs, investors can choose their market exposure, whether it be the S&P 500 or the Nasdaq-100. The issuer leverages what’s been available in other structures and uses the ETF vehicle’s liquidity, tax efficiency, and tradability.
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