BlackRock Adds Max Buffer ETF to Active ETF Platform

Rhea-AI Summary

BlackRock has introduced the iShares Large Cap Max Buffer Jun ETF (Cboe: MAXJ) as part of its new buffer ETF series. This ETF provides up to 100% downside protection while aiming to mirror the performance of the iShares Core S&P 500 ETF (IVV), with an upside cap. The MAXJ, noted for being the most affordable of its kind, launched today. BlackRock's buffer ETFs leverage options strategies to help investors navigate market volatility and stay invested through various market cycles. The series includes upcoming ETFs such as SMAX, DMAX, and MMAX, which will roll out quarterly over the next year. BlackRock now manages $25 billion in assets across over 40 active ETFs in the U.S.

Positive

• Launch of iShares Large Cap Max Buffer Jun ETF (MAXJ), providing up to 100% downside protection.
• Most affordable buffer ETF in the market, aiming to protect against IVV losses.
• BlackRock manages $25 billion in assets across more than 40 active ETFs in the U.S.

Negative

• No guarantee of downside protection; potential for significant losses.
• Fund subject to higher fees due to active management and options strategies.
• Performance may not match the underlying ETF or provide full downside protection in extreme market conditions.

Insights

Financial Analyst

BlackRock's introduction of the Max Buffer ETF represents a significant enhancement to its active ETF platform, aiming to provide substantial downside protection while capturing equity growth potential. This new product is particularly relevant in a market where investors are increasingly concerned about volatility.

From a financial standpoint, the expense ratio of 0.50 is competitive, making it accessible compared to other buffer ETFs. The inclusion of a 100% downside buffer is unique and provides a safety net for investors, albeit with certain caveats. Investors must understand that the buffer is only effective if the ETF is held for the entire hedge period and there are potential risks associated with options trading, such as counterparty risk.

The strategic timing of the launches at quarter-end periods also aligns well with institutional portfolio rebalancing practices, potentially attracting significant inflows. However, the necessity for investors to hold the ETF for the full hedge period to realize the designed benefits could limit its appeal to more active traders looking for short-term gains.

Market Research Analyst

The introduction of buffer ETFs by BlackRock is a timely innovation, especially with record cash levels sitting idle due to market uncertainties. The convenience of an ETF structure combined with institutional risk management strategies will likely resonate well with both retail and institutional investors.

The product's ability to shield against downside risk without completely foregoing upside potential is attractive. However, market conditions and the cap reset mechanism could affect the performance unpredictably. Each hedge period will reset the cap based on current market conditions, which might not always be favorable.

In the long term, this product could enhance investor confidence and participation in equity markets. Yet, the caveat on liquidity of FLEX options and the associated risks should be carefully considered by investors. Being a buy-and-hold strategy, it might not suit those looking for frequent trading or immediate liquidity.

Expands access to options strategies in the convenience of an ETF

Includes the most affordable buffer ETF that targets up to 100% downside protection in the market¹

NEW YORK--(BUSINESS WIRE)-- BlackRock bolstered its active ETF platform with a series of buffer ETFs that aims to provide investors with exposure to equity growth potential while seeking to maximize downside protection. The first of the series – the iShares Large Cap Max Buffer Jun ETF (Cboe: MAXJ) launched today, making it the most affordable max buffer ETF that targets up to 100% downside protection in the market.¹

“With record levels of cash sitting on the sidelines², many investors are looking for tools to help navigate market volatility before they step back into the market,” said Rachel Aguirre, Head of U.S. iShares Product at BlackRock. “iShares Max Buffer ETFs simplify access to traditional institutional risk management strategies in the convenience of the ETF wrapper, equipping investors with resilient portfolio tools to help them stay invested in any market cycle.”

Product innovation expands toolkit for long-term investors

By utilizing a combination of options, the iShares Large Cap Max Buffer ETFs (Max Buffer ETFs) seek to track the share price return of the underlying ETF, the iShares Core S&P 500 ETF (IVV), up to an approximate upside cap, while seeking to provide up to a 100% approximate buffer against IVV losses for each applicable hedge period.

The Max Buffer ETFs are expected to launch over a one-year period beginning at each quarter end, with the cap resetting for each Fund upon the option expiry at the end of each one-year period.

Designed as buy-and-hold strategies, the Max Buffer ETFs are the latest additions to BlackRock’s outcome-oriented product suite, which includes two buffer ETFs launched last year, and a range of BuyWrite fixed income and equity ETFs. BlackRock now manages $25 billion in assets under management across more than 40 active ETFs in the U.S.³

Fund Name	Reference Asset	Downside Buffer	Expense Ratio*		Hedge Period	Anticipated Launch Date
			Gross	Net
iShares Large Cap Max Buffer Jun ETF (Cboe: MAXJ)	S&P 500 (IVV ETF)	100%	0.53%	0.50%	July 1 to June 30	July 1, 2024
iShares Large Cap Max Buffer Sep ETF (Cboe: SMAX) **	S&P 500 (IVV ETF)	100%	0.53%	0.50%	October 1 to September 30	October 1, 2024
iShares Large Cap Max Buffer Dec ETF (Cboe: DMAX) **	S&P 500 (IVV ETF)	100%	0.53%	0.50%	January 1 to December 31	January 2, 2025
iShares Large Cap Max Buffer Mar ETF (Cboe: MMAX) **	S&P 500 (IVV ETF)	100%	0.53%	0.50%	April 1 to March 31	April 1, 2025

* BlackRock, as of June 30, 2024. Net expense ratio shown reflects a contractual fee waiver in place through November 30, 2029.

**A registration statement has been filed for the Fund and the registration statement has become effective. However, shares of the Fund are not yet available for purchase or sale. Carefully consider the Funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Fund’s prospectus, which may be obtained by visiting the SEC website, by visiting www.iShares.com prior to launch, or by calling 1-800-iShares (1-800-474-2737). Read the prospectus carefully before investing.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal.

There can be no guarantee that the Fund will be successful in its strategy to provide downside protection against Underlying ETF losses. The Fund does not provide principal protection or non-principal protection, and, despite the Approximate Buffer (the “Buffer”), an investor may experience significant losses on their investment, including the loss of their entire investment. A blended portfolio of Expiring Options and New Options during a Rebalance Period will impact the Fund’s ability to realize the full benefit of the Buffer or may subject the Fund’s return to an upside limit that is slightly lower or higher than the Approximate Cap (the “Cap") for the applicable Hedge Period. Accordingly, investors may bear losses against which the Buffer is anticipated to protect and be subject to an upside limit that is lower than the Cap. In the event an investor purchases Fund shares after a Hedge Period begins or sells Fund shares prior to the end of the Hedge Period, the returns realized by the investor will not match those that the Fund seeks to provide. In periods of extreme market volatility, the Fund’s return may be subject to downside protection significantly lower than the Buffer and an upside limit significantly below the Cap. A new cap is established during each Rebalance Period and is dependent upon current market conditions. As such, the Cap is likely to change, sometimes significantly, from one Hedge Period to the next. The Fund invests in FLEX Options that derive their value from the Underlying ETF. FLEX Options are subject to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation, and may be less liquid than other securities. The value of FLEX Options may be affected by interest rate changes, dividends, actual and implied volatility levels of the Underlying ETF’s share price, and the remaining time until the FLEX Options expire. Because of these factors, the Fund’s NAV may not increase or decrease at the same rate as the underlying ETF’s share price.

The Fund is actively managed and does not seek to replicate the performance of a specified index, may have higher portfolio turnover, and may charge higher fees than index funds due to increased trading and research expenses.

An investment in ETFs is not equivalent to and could involve significant risks not associated with an investment in cash.

This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change.

Buying and selling shares of ETFs may result in brokerage commissions.

The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

©2024 BlackRock, Inc. or it's affiliates. All rights reserved. BLACKROCK® and iSHARES are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.

Not FDIC Insured. May Lose Value. No Bank Guarantee.

BlackRock, Inc.,
50 Hudson Yards New York, NY 10001

________________________

1 BlackRock and Morningstar, as of June 20, 2024, based on review of all 100% Max Buffer ETFs in the “US Funds Options Trading” Morningstar Category. The Fund aims to provide a 100% downside buffer against price declines of the Underlying for the 1-year period, before fees and expenses, if held for the entire hedge period.

2 Bank of America, May 2024.

3 BlackRock, as of June 30, 2024

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20240701314323/en/

MEDIA CONTACT

Joanna Yau

Joanna.Yau@BlackRock.com

646.856.7274

Source: BlackRock

FAQ

What is the iShares Large Cap Max Buffer Jun ETF (Cboe: MAXJ)?

The iShares Large Cap Max Buffer Jun ETF (MAXJ) is an ETF by BlackRock that provides up to 100% downside protection while targeting the performance of the iShares Core S&P 500 ETF (IVV), with an upside cap.

How does the MAXJ ETF protect against market downturns?

The MAXJ ETF uses options strategies to provide up to 100% downside protection against losses in the underlying IVV ETF over a one-year hedge period.

When will other Max Buffer ETFs be launched?

Other Max Buffer ETFs, including SMAX, DMAX, and MMAX, will be launched quarterly over the next year, starting from October 1, 2024.

What are the expense ratios for BlackRock's new buffer ETFs?

The buffer ETFs have a gross expense ratio of 0.53% and a net expense ratio of 0.50%, with a contractual fee waiver until November 30, 2029.

What assets does BlackRock manage in active ETFs?

BlackRock manages $25 billion in assets across more than 40 active ETFs in the U.S. as of June 30, 2024.