This Week in ETFs: iShares Debuts Buffer ETF with 100% Protection

The iShares Large Cap Max Buffer Jun ETF (MAXJ ) offers potential upside exposure to the price performance of an S&P 500 ETF before expenses of 11.14%  while aiming to protect 100% against any downside performance. Also known as defined outcome ETFs, the buffer ETF space has grown to encompass more than 250 ETFs and assets of nearly $50 billion since the first ones rolled out in 2018, according to a recent article from Kiplinger.

“Record levels of cash sitting on the sidelines. Many investors are looking for tools to help navigate market volatility before they step back into the market,” said BlackRock head of U.S. iShares product Rachel Aguirre.

“iShares Max Buffer ETFs simplify access to traditional institutional risk management strategies in the convenience of the ETF wrapper. This equips investors with resilient portfolio tools to help them stay invested in any market cycle,” she added.

Like other similar funds, MAXJ uses a variety of positions and inflexible exchange options tied to the iShares Core S&P 500 ETF (IVV A), which will reset in one year. Three more ETFs teed up to launch in 2024 and 2025 will reset annually. This will occur on the first trading day of October, January, and April. MAXJ has an expense ratio of 0.50% and trades on the Cboe BZX Exchange.

Most of the other ETFs that launched on July 1 were also funds offering some form of downside protection via FLEX options. Calamos launched two funds tied to the performance of the Russell 2000 and the S&P 500, both offering complete downside protection just as MAXJ does.

AllianzIM also added a third fund to its lineup of “Uncapped” ETFs with the rollout of the AllianzIM U.S. Equity Buffer 15 Uncapped July ETF (JULU B-). The new ETF looks to provide exposure to the upside price performance of the SPDR S&P 500 ETF Trust (SPY A-) while protecting against the first 15% of downside performance.

However, unlike most buffer or defined outcome ETFs, JULU does not have a cap. Instead, the reference asset must see an increase of at least 2.75% before expenses before JULU experiences any upside performance associated with SPY. JULU comes with an expense ratio of 0.74% and is listed on the Cboe BZX Exchange.

Innovator dominated July 1 with the launch of nine ETFs offering various types of downside protection. The swath of new funds includes two international buffer ETFs with quarterly resets.

Another pair of ETFs launched by Innovator offers downside protection on a quarterly reset while tracking domestic ETFs. The Innovator Nasdaq-100 10 Buffer ETF – Quarterly offers exposure to the price performance of the Invesco QQQ Trust (QQQ B) with a pre-expenses cap of 4.36%, and the Innovator U.S. Small Cap 10 Buffer ETF – Quarterly does the same with the iShares Russell 2000 ETF (IWM A-) with an upside cap of 9.80%.

Both funds have expense ratios of 0.79% and will reset on September 1. QBUF lists on the Nasdaq Stock Exchange, while RBUF lists on the Cboe BZX Exchange.

Meanwhile, the remaining funds include three “Defined Protection” ETFs that aim to protect against 100% of losses during their outcome period. They also provide upside exposure to the price performance of SPY. The funds, their tickers, and pre-expense upside caps are below:

• Innovator Equity Defined Protection ETF – 6mo Jan/Jul (JAJL C+), 5.00%
• Innovator Equity Defined Protection ETF – 1 Yr July (ZJUL B-), 9.50%
• Innovator Equity Defined Protection ETF – 2 Yr to July 2026 (AJUL C), 18.20%

The funds have outcome periods of 6 months, one year, and two years, respectively. Each has an expense ratio of 0.79%.

Innovator also launched the Innovator Premium Income 9 Buffer ETF (HJUL ) and the Innovator Premium Income 15 Buffer ETF (LJUL B-), which both use SPY as a reference asset, protecting against 9% and 15% declines in SPY’s price. However, they do not participate in SPY’s upside performance. Instead, they offer monthly distribution rates that work out to 7.15% and 6.38%, respectively. They each charge expense ratios of 0.79% and are listed on the Cboe BZX Exchange.

The TrueShares Quarterly Bear Hedge ETF (QBER B-) and the TrueShares Quarterly Bull Hedge ETF (QBUL C+) both look to provide investors with risk-managed exposures using options strategies. Each fund has an expense ratio of 0.79% and is listed on the Cboe BZX Exchange.

QBER and QBUL are actively managed and aim to achieve their goals on a rolling three-month basis. The former focuses on principal protection while attempting to generate positive returns when U.S. equities are in a downturn. The fund implements put options and holds mainly in short-term fixed-income securities.

The latter fund looks to participate in the upside of U.S. equity performance. It will protect against a market decline by investing in a combination of short-term fixed income and call options.

Finally, ETF newcomers SMI Advisory and 3Fourteen Research teamed up to launch the 3Fourteen & SMI Advisory, an actively managed ETF. The fund selects a narrow portfolio of 20 securities from the S&P 500 Index using quality, trend, and momentum screens that the managers run on a monthly basis to update the portfolio.

At launch, the fund’s top holdings included CDW Corp., Accenture plc, and Pulte Group.

FCTE has an expense ratio of 0.89% and is listed on the Nasdaq Stock Exchange.

Two ETFs saw their last day of trading during the week. The Tema Global Royalties ETF (ROYA B-), which launched less than a year ago, and the Goldman Sachs Defensive Equity ETF (GDEF ) both shuttered, adding further to the closure count for 2024.

Also during the week, the BNY High Yield Beta ETF (BKHY ) changed its name to the BNY High Yield ETF and dropped its index, the Bloomberg U.S. Corporate High Yield Total Return Index, to become actively managed.

The iShares MSCI New Zealand ETF (ENZL B) is set to change its index from the MSCI New Zealand IMI 25/50 Index to the MSCI New Zealand All Cap Top 25 Capped Index in early September.

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