3 Jul 2024

Just in: BlackRock just launched a "buffer fund", a stock ETF with a 100% downside hedge.

The iShares Large Cap Max Buffer Jun ETF started trading on Monday under the ticker symbol $MAXJ What’s a buffer fund? These funds offer hedged exposure to stocks by limiting losses while also capping gains, and they’re not exactly a new concept. Since their inception, they’ve attracted industry giants like BlackRock, and they’ve drawn about $5 billion in inflows so far this year. But even before they came around, investment banks were offering their clients “structured notes” – a hybrid product that combines bits and pieces of different financial instruments into one to create customized risk-reward profiles. While there are many different types of structured notes out there, “buffer participation notes” are among the most popular. The notes and buffer funds work in the exact same way – they’re just packaged as different investment vehicles. Having said that, buffer funds are a lot more accessible for retail investors. Buffer participation notes, like most structured notes, are typically offered by investment banks only to sophisticated, high-net-worth clients. Buffer ETFs, by contrast, can be bought and sold just like any ordinary stock. Source: Finimize


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