BlackRock Moves Into Growing Buffer ETF Field

Market for funds that limit gains and declines has surged to $23 billion.

RonDay
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Managing Editor
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Reviewed by: Ron Day
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Edited by: Ron Day

BlackRock Inc., the world’s biggest exchange-traded fund issuer, is preparing to offer a pair of funds that seek to limit losses for investors, so-called buffer ETFs that are among the fastest-growing corners of the industry. 

The iShares issuer this week filed a prospectus with the Securities and Exchange Commission to offer the BlackRock Large Cap Moderate Buffer ETF and the BlackRock Large Cap Deep Buffer ETF.

The Moderate buffer fund seeks to “provide downside protection against approximately the first 5% of Underlying ETF losses over each calendar quarter,” while the Deep buffer fund seeks to protect against losses between approximately 5% and 20% each quarter. 

The funds feature a trade-off for the downside protection by also limiting potential gains. Funds use options to limit losses. 

Buffer ETFs, also known as defined outcome funds, have surged in popularity since Innovator ETFs introduced them four years ago, and now include $23.2 billion in assets in 163 funds, according to etf.com data.  

The largest is the $909.6 billion FT Cboe Vest Fund of Buffer ETF (BUFR), and in the last trailing year, the best-performing was the Innovator International Developed Power Buffer ETF - January (IJAN), at 6.63%.  

The funds may be BlackRock’s first buffer product, Bloomberg ETF analyst Eric Balchunas tweeted. He also said that the plan is “intriguing,” since the firm probably saw other firms’ offerings bringing in new assets and “wanted a piece of the action.” 

New York-based BlackRock’s iShares has $2.27 trillion in assets under management, about one-third of the entire U.S. ETF industry. It manages 384 ETFs. 

The funds will track the iShares Core S&P 500 ETF (IVV), which has $301.1 billion in assets under management. It’s gained 7.4% this year while shedding $3.58 billion in assets over the past 30 days. 

The most recently launched buffer ETF is the FT Cboe Vest U.S. Equity Moderate Buffer ETF - March (GMAR) on March 20. It’s gained 2.3%. 

While the filing didn’t list the funds’ expense ratio, buffer ETFs are higher than most, ranging around .81%, while the average iShares fund is .31%.  

BlackRock declined to comment. 

 

Contact Ron Day at  [email protected] or follow him on Twitter at @RonDayETF   

Ron Day is Managing Editor at etf.com. He joined the company in October 2022 and previously served as editor and deputy managing editor.

Ron covered business and financial news at Bloomberg News for 20 years, working on the breaking news, technology, commodities, headlines and First Word teams. He was previously senior editor at ESG news outlet Karma Impact and filled the same role at Boundless Impact. He also covered a variety of beats at New Jersey daily papers including the Daily Record in Parsippany, the North Jersey Herald & News and the Asbury Park Press. Ron's freelance work has been published in AARP.com, Investopedia.com and BigThink.com.

Ron is an advocate and fan of literacy. He hopes to one day master his Telecaster, rather than the other way around. His wonderful family includes a 10-lb. malti-poo named Emmy.