(Reuters) – BlackRock has launched a “buffer” exchange-traded fund that aims to provide 100% decline coverage for risk-averse investors looking to tap the stock 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 while providing downside protection over a specific period.
The new product is likely to appeal to investors hoping to ride a rally in stock markets as they continue to trade near record highs. However, they are concerned that a slowing economy and prolonged high interest rates could negatively impact sentiment in the future.
Buffer ETFs also typically have lower redemption requests during periods 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 manage market volatility before venturing back into the market,” said Rachel Aguirre, head of BlackRock’s U.S. iShares product.
The iShares Large Cap Max Buffer Jun ETF began trading on Monday under the ticker symbol “MAXJ” with a net expense ratio (fees after waivers and redemptions) of 0.50%.
The asset manager said the ETF will track the returns of the benchmark S&P 500 using upside-cap options, while providing 100% hedge against all downside risks for approximately one year.
BlackRock said it had $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 Bengaluru; Editing by Maju Samuel)
