ETFs
BlackRock Launches Equity ETF With 100% Downside Coverage
(Reuters) – BlackRock has launched a “buffer” exchange-traded fund that seeks to offer 100% downside protection to risk-averse investors looking to tap into equity markets, the world’s largest asset manager said on Monday.
So-called buffer or risk-managed ETFs help maximize an asset’s return for investors and simultaneously provide downside protection over a given period.
The new product will likely appeal to investors who are hoping to ride a rally in stock markets as they continue to trade near record highs, but are concerned that a slowing economy and higher interest rates for longer could hurt sentiment going forward.
Buffer ETFs also typically experience lower redemption requests during times of high market volatility compared to traditional ETFs that track stock indices.
“With record levels of cash sitting on the sidelines, many investors are looking for tools to help them manage market volatility before returning to the market,” said Rachel Aguirre, head of U.S. iShares product at BlackRock.
The iShares Large Cap Max Buffer Jun ETF began trading on Monday under the ticker symbol “MAXJ” with a net expense ratio – expenses after waivers and redemptions – of 0.50%.
The asset manager said the ETF would track the returns of the benchmark S&P 500 index using options with an upside cap, while providing a 100% hedge against any downside for about a year.
BlackRock added that it now manages $25 billion in assets under management across more than 40 active ETFs in the United States, as of June 30.
(Reporting by Manya Saini in Bangalore; editing by Maju Samuel)