New ETFs Offer Buffered Bond Exposure

Innovator adds another twist to its defined outcome lineup.

Reviewed by: Heather Bell
Edited by: Heather Bell

Today, Innovator took the defined outcome ETF space in another direction with the launch of two funds targeting long-term fixed income. The Innovator 20+ Year Treasury Bond 9 Buffer ETF – July (TBJL) and Innovator 20+ Year Treasury Bond 5 Buffer ETF – July (TFJL) both are designed to track the share price of the iShares 20+ Year Treasury Bond ETF (TLT) with caps on upside performance and downside limits.

Both ETFs come with an expense ratio of 0.79% and list on Cboe Global Markets, the parent company of


Methodology & Investment Argument

While TBJL protects against the first 9% of losses during the outcome period, in a change from existing buffer ETFs, TFJL has a hard floor that only allows a maximum loss of 5%. The cap on the former is 9.25% before expenses, while the latter has a pre-expenses upside cap of 6.75%. The funds are both actively managed and primarily hold flexible exchange (FLEX) options on TLT.

“For people getting into long-term Treasuries right now, it’s a very risky proposition, because if rates go up, they stand to lose a very significant portion of their money. A very small move would take years to make back in interest what they lost,” said Innovator ETFs CEO Bruce Bond.

He notes that equities are at all-time highs while the bond market is at the end of a bull market with not much more room for rates to go lower.

“We’re basically hitting the compression point,” Bond added. “Retail investors have not had the tools to hedge against this type of risk. Whether they’re in a core bond holding or a longer-term holding, they’re at risk that rates could move up and cause significant losses.”

Indeed, data provided by Innovator suggests that if interest rates returned to December 2018 levels, 20-year Treasury bonds could see a decline of more than 40%.

“If you’re a holder of TLT today, and you enjoyed over the last year a [large] upswing in the value of TLT, all that could evaporate if we just go back to where rates were a year ago. So why not still have some upside available to you, but put a floor or a buffer in to lock in some of that gain? If you’re a core bondholder or especially a longer-term bondholder, these make perfect sense for you to rotate into,” Bond said.

TBJL and TFJL, Innovator’s first fixed income ETFs of this nature, are both scheduled to reset on June 30, 2021.

This most recent launch brings the total number of defined outcome ETFs in the Innovator family to 50. The issuer also offers defined outcome ETFs tied to the performance of the S&P 500, Russell 2000, Nasdaq-100, MSCI Emerging Markets and MSCI EAFE indexes. Although there are a total of four issuers competing in the defined outcome ETF space right now, including First Trust, TrueMark and Allianz, Innovator has the broadest product lineup.

Contact Heather Bell at [email protected]


Heather Bell is a former managing editor of She has also held editorial positions at Dow Jones Indexes and Lehman Brothers. Bell is a graduate of Dartmouth college and resides in the Denver area with her two dogs.