So-called buffer or risk-managed ETFs maximize returns from investors’ assets while providing protection from downside risk over a specific period of time.
The novel product will be appealing to investors hoping to ride the rally in stock prices as they continue to trade near record highs, but who worry that a slowing economy combined with high interest rates for a long period of time could hurt sentiment going forward.
Buffer ETFs typically experience fewer redemption requests during periods of market volatility.
“BlackRock is not an early entrant in the buffered ETF space, it’s actually a bit late, but given the company’s size, influence and marketing power, it has every chance of catching up and overtaking the earlier entrants in the market,” said Michael Ashley Shulman, partner and chief investment officer at Running Point Capital Advisors. “They may be especially fortunate to launch a buffered ETF now, with the market nearing all-time highs and many investors feeling nervous, especially about inflation, the upcoming election and growing debt,” he added. The iShares Large Cap Max Buffer Jun ETF began trading on Monday under the ticker symbol “MAXJ.” The asset manager said the ETF tracks the returns of the benchmark S&P 500 using options with upside caps, providing a 100% hedge against all downside for about a year.
“With record amounts of cash taking over the markets, many investors are looking for tools to help them weather market volatility before returning to the markets,” said Rachel Aguirre, head of U.S. iShares product at BlackRock.
BlackRock added that as of June 30, it managed $25 billion in assets through more than 40 active ETFs in the U.S.
