ETFs
BlackRock Enters Booming Equity ETF Market With 100% Coverage
(Bloomberg) — BlackRock Inc. is the latest asset manager to launch an exchange-traded fund that offers a way to profit from rising stocks, while covering 100% of the downside if markets fall.
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The iShares Large Cap Max Buffer Jun ETF is expected to begin trading under the ticker symbol MAXJ on Monday. Through options, it will provide investors with upside exposure to the S&P 500 up to a cap of approximately 10.6% and cover any downsides over a 12-month period.
Such offerings could appeal to investors looking to profit from the record rally in stocks, even as concerns grow over the outlook for growth and profits. At the same time, the Federal Reserve announces plans to keep interest rates high, while the US presidential election adds another potential wild card for markets.
As is often the case with so-called buffer or defined-outcome ETFs, MAXJ investors only get full protection if they keep their money in the fund for its entire life, in this case 12 months from the day it starts trading. Otherwise, they will have to invest in the fund when the shares are close to that starting level. In a year, they can redeem their shares or roll them over to the next cycle.
“They can almost be thought of as an alternative to cash or treasury-type instruments in the sense that you get downside protection, while also providing the ability to capture growth and upside in the market,” Rachel Aguirre, head of U.S. iShares product at BlackRock, said in an interview.
BlackRock plans to serially issue the ETF every three months, with the next one scheduled for October 1, followed by subsequent releases in January and April, it said in a press release. The cap will automatically reset at the end of each one-year period.
Assets in buffer ETFs have reached some $46 billion, roughly triple since October 2022, according to Bloomberg Intelligence.
Defensive investors can certainly get high yields without risk from Treasuries, but Aguirre said they would far outpace those returns if stocks rally again. The S&P 500 gained about 14.5% in the first half of the year, buoyed by solid U.S. growth and a surge in mega-cap technology stocks.
An Innovator ETFs ETF that promises 100% protection against losses over a six-month period is also set to launch Monday. It will trade under the symbol JAJL.
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–With the assistance of Vildana Hajric.
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