Here's what the prospectus says:
While the Fund seeks to provide 100% protection against losses experienced by the Underlying ETF (before fees and expenses) for shareholders who hold Fund Shares for an entire Outcome Period, there is no guarantee it will successfully do so.
There is no guarantee the capital protection and cap will be successful and a shareholder investing at the beginning of an Outcome Period could also lose their entire investment.
There is no guarantee that the Fund will be successful in providing these investment outcomes for any Outcome Period, and an investor may experience returns on the Fund significantly below the Cap.
In periods of extreme market volatility or during market disruption events, the Fund’s ability to offset investor losses through the use of the FLEX Options to achieve the stated Capital Protection, or provide a return up to the stated upside Cap may be impaired, resulting in an upside limit significantly below the Cap and downside protection significantly lower than full capital protection (i.e., losses greater than 0%), because the Fund may not be able to trade or exercise existing FLEX Options, or may not receive timely payment from its counterparties. An investor may lose their entire investment and an investment in the Fund is only appropriate for investors willing to bear those losses.
I think it is unlikely that these funds will experience a significant loss, or a major deviation in the expected upside. But I suppose that depends on how you define significant.
If you reasonably expect 100% downside protection, and you end up with a loss of, I dunno, say, one fourth of one percent, because the index lost 4.3% over the applicable time period, and their option strategy didn't work exactly they way their model predicted it would...
Well, if I invested $50K in this thing instead of buying 100 shares of SPY, then I have lost $125.00 (instead of losing $2,150.00) and I'm probably not going to freak out.
But if I am managing an institutional account for a charity or something, and I put one third of the money in this thing, assuming that it is impossible to lose any principal, and it suffers a loss of one fourth of one percent... well, that might generate some uncomfortable conversations with the board of trustees.
