A so-called buffer or risk-managed ETF helps investors maximize returns from assets while also providing protection against losses over a period of time.
The innovative product will likely appeal to investors who hope for a rally in stock markets as they continue to trade near record highs, but are concerned that a slowing economy and prolonged interest rates together could hurt sentiment going forward.
Buffer ETFs also typically see fewer redemption requests during periods of extreme market volatility.
“BlackRock is not early — and actually a bit late — to the buffered ETF game, but with (the company’s) size, reach and marketing machine, it has a fair chance of catching up and surpassing previous market entrants,” it said. Michael Ashley Shulman, Partner and CIO at Running Point Capital Advisors.
“Launching a buffered ETF now, when the market is near all-time highs and many investors are nervous – especially about inflation, the upcoming elections and expanding debt – may be particularly fortuitous for them,” he added.
The iShares Large Cap Max Buffer June ETF began trading on Monday under the ticker symbol ‘MAXJ’.
The asset manager said the ETF would track the return of the benchmark S&P 500 using options with an upside cap, while providing a 100% hedge to all downside for about a year.
“With record levels of cash in the market, many investors are looking for tools to help them navigate market volatility before returning to the market,” said Rachel Aguirre, head of US iShares product at BlackRock.
BlackRock added that it now had $25 billion in assets under management across more than 40 active ETFs in the United States as of June 30.
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