(Reuters) – BlackRock Inc, the world’s largest asset manager, said on Monday it has launched a “buffer” exchange-traded fund aimed at offering a 100% downside hedge to risk-averse investors looking to invest in the stock market.
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 compared to traditional ETFs that track stock indexes.
“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.
The iShares Large Cap Max Buffer Jun ETF began trading Monday under the ticker symbol “MAXJ” and has a net expense ratio (expenses after waivers and reimbursements) of 0.50%.
The asset manager said the ETF will track the returns of the benchmark S&P 500 using options with upside caps, providing a 100% hedge against all downside for about a year.
BlackRock added that as of June 30, it managed $25 billion in assets through more than 40 active ETFs in the U.S.
(Reporting by Manya Saini in Bengaluru; Editing by Maju Samuel)
