An ETF that only goes up? New 'buffer' product to offer 100% downside protection

financialpost.com:

The pioneer of the world’s first “buffer ETFs” — exchange-traded funds that limit losses during market selloffs — has launched a new product that offers investors complete downside protection.

Investors in the US$7.5 trillion ETF universe can now put money behind the Innovator Equity Defined Protection ETF, which began trading under the ticker TJUL on Tuesday. The offering comes from Innovator Capital Management, which launched the first so-called buffer ETFs, also sometimes referred to as defined-outcome funds, in 2018.

Buffer funds, as the name suggests, offer buffered exposure to stocks by limiting investors’ downside risk while also capping upside potential. Since their inception, the products have attracted industry heavyweights like BlackRock Inc. — the world’s largest ETF issuer — and drawn roughly US$5 billion of inflows so far this year, Bloomberg Intelligence data shows.

Buffer funds can shield against a wide range of losses should their respective gauges drop, though the most popular ones tend to be in the 15 per cent buffer range, according to Bloomberg Intelligence. Yet, Innovator says that its TJUL fund — which will track S&P 500 returns up to a capped percentage over a two-year period — will be the first of its kind to protect against 100 per cent of stock losses.

The company sees the tremendous amounts of cash going toward pockets of the insurance market — such as fixed-indexed annuities — as indicative that there’s demand for the type of exposure TJUL offers. That market has rarely been challenged, said Graham Day, chief investment officer at Innovator.

“If we look at the insurance and structured-note world, we find that there is far more demand for products that give you some equity upside, but with 100