INVESTING FOR OUTCOMES
Target specific investment outcomes like enhanced income, growth, and protection with iShares Outcome ETFs.
iShares Outcome ETFs are innovative, options-based strategies designed to help investors potentially achieve specific investing goals. These products can play a powerful role in portfolios offering benefits such as enhanced yield potential and diversification.
Over the past three years, outcome-focused ETFs have experienced a growth rate of 70%, as an increasing number of investors seek enhanced income, combined with the liquidity, lower fees, transparency, and tax efficiency offered by the ETF wrapper. ¹
U.S. outcome ETF AUM (2018-2023)¹
Better manage emotions, keeping your most risk-averse clients invested.
Seeks to reduce volatility, balance income and growth, or amplify cash flow in their portfolio.
Low fees, intraday liquidity, transparency, and tax efficiency.
1 Source: BlackRock, Morningstar, as of 12/31/2023. 78% growth rate based on the 5-year compound annual growth rate (CAGR) of AUM for U.S. Outcome ETFs. Outcome ETF AUM represented by a universe of 326 U.S.-based ETFs. including 293 solutions-oriented strategies as categorized including derivative income and downside protection and 33 ETFs across the Bear Market, Derivative Income, Options Trading, US Fund Derivative Income, and US Fund Options Trading Morningstar Categories. Solution-oriented strategies are ETFs that use derivatives as a source of income or downside protection. ETFs are obliged to distribute portfolio gains to shareholders by year-end. These gains may be generated due to index rebalancing, trading within the fund, or to meet diversification requirements. Trading shares of ETFs may also generate tax consequences and transaction expenses.
Provides exposure to active U.S. large-cap stocks while seeking enhanced dividend yield from selling call options. >
Seeks to provide enhanced monthly income by selling monthly covered call options on a range of indices representing equities (IVVW, IWMW) or fixed income (TLTW, LQDW, HYGW). >
Seeks to track the S&P 500 up to a pre-determined cap, while using options to provide downside protection within a buffer range on a quarterly basis. >
Whether your clients’ goals are enhanced income, income and growth, or targeted downside protection, iShares Outcome ETFs can help you meet their needs.
Seek enhanced income from a monthly covered call strategy on U.S. equity or fixed income ETFs.
Seek income and growth by combining active large-cap stock selection with an index covered call strategy.
Seek to provide targeted downside protection while maintaining upside market participation up to an approximate cap.
After a decade of near- zero interest rates, investors are rethinking the tradeoffs between generating income and investing for long-term growth. BlackRock Systematic team has developed a combination of stock selection strategies and option-based strategies that optimize this very tradeoff.
Raffaele Savi
Global Head of BlackRock Systematic and Co-CIO and Co-Head of Systematic Active Equity]
After a decade of near zero interest rates, investors are rethinking the tradeoffs between generating income and investing for long-term growth. BlackRock Systematic has developed a combination of stock selection strategies and option-based strategies that optimize this very tradeoff.
[on screen: BlackRock Advantage Large Cap Income ETF]
The BlackRock Advantage Large Cap Income ETF (aka BALI) provides investors with choices, aligning long-term goals with the dual aim of income generation and market participation. BALI seeks to enhance income through dividends, manages equity risk for downside resiliency and provides exposure to a defensive equity portfolio for continued potential market growth.
[on screen: Why BALI?]]
[split screen and show the list of benefits as the narrator speaks about them. Enhanced income]
BALI targets enhanced income by deploying a dividend rotation strategy in combination with an option writing premium strategy. The fund invests in U.S. large cap stocks, while writing call options on the S&P 500 Index in an attempt to deliver a consistent monthly dividend.
[on screen: Market participation]
The fund’s active stock selection seeks to capture large cap equity growth, while focusing on quality to help mitigate downside risk in the portfolio. BALI is managed by the BlackRock Systematic equity team, which seeks to uncover insights faster, at greater scale, and with more precision using data and machine learning.
[on screen: Experienced team]
The team has managed systematic portfolios for over 35 years and has over a decade of experience managing global equity income strategies. BlackRock Systematic manages over $5B in dedicated equity income strategies and our broader systematic platform is comprised of over $223B of assets under management from clients around the entire world.
To learn more about how BALI can help investors like you navigate the current market environment, please visit BlackRock.com/BALI.
[Closing music]
Disclosures
Real yield historical data provided by Bloomberg, as of August 31, 2023.
The BlackRock Systematic team data is provided by BlackRock as of August 31, 2023.
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 prospectus, 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.
The Fund is actively managed and does not seek to replicate the performance of a specified index. The Fund may have a higher portfolio turnover than funds that seek to replicate the performance of an index. When the Fund sells call options on a large cap equity index, it receives a premium but it takes on the risk that these options may reduce any profit from increases in the market value of the long equity positions held by the Fund. Any such reduction in profits would be the difference between the payoff of the call option and the premium received. The Fund would also retain the risk of loss if the long equity positions decline in value. The premiums received from the options may not be sufficient to offset any losses sustained from the long equity positions. Factors that may influence the value of the options generally include the underlying asset’s price, interest rates, dividends, the actual and implied volatility levels of the underlying asset’s price, and the remaining time until the options expire, among others. The value of the options written by the Fund typically do not increase or decrease at the same rate as the underlying asset’s price on a day-today basis due to these factors.
A fund's use of derivatives may reduce a fund's returns and/or increase volatility and subject the fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. A fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited. There is no guarantee that any fund will pay dividends.
There can be no assurance that any fund’s hedging transactions will be effective. This material is provided for educational purposes only and is not intended to constitute investment advice or an investment recommendation within the meaning of federal, state or local law. You are solely responsible for evaluating and acting upon the education and information contained in this material. BlackRock will not be liable for direct or incidental loss resulting from applying any of the information obtained from these materials or from any other source mentioned. BlackRock does not render any legal, tax or accounting advice and the education and information contained in this material should not be construed as such. Please consult with a qualified professional for these types of advice.
©2024 BlackRock, Inc. or its affiliates. All Rights Reserved. BLACKROCK and iSHARES is a trademark of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.
1. Source: Bloomberg 12/31/2023. Universe represented by U.S. Outcome ETF AUM. * BlackRock projection as of May 1, 2022. Subject to change. The figures are for illustrative purposes only and there is no guarantee the projections will come to pass.† So-called portfolio trades are when broker-dealers simultaneously buy or sell large numbers of individual bonds at once.
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. This information must be preceded or accompanied by a prospectus for TLTW, HYGW, LQDW.
Investing involves risk, including possible loss of principal.
There is no guarantee that an Outcome ETF will be successful in meeting its investment objective. Investing involves risk, including possible loss of principal.
BuyWrite ETFs: Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in the value of debt securities. Credit risk refers to the possibility that the debt issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities. An investment in the Fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency and its return and yield will fluctuate with market conditions. Investment in a fund of funds is subject to the risks and expenses of the underlying funds. A BuyWrite Strategy ETF’s use of options may reduce returns or increase volatility. During periods of very low or negative interest rates, the Underlying Fund may be unable to maintain positive returns. Very low or negative interest rates may magnify interest rate risk. In a falling interest rate environment, the ETF may underperform the Underlying Fund. By writing covered call options in return for the receipt of premiums, the ETF will give up the opportunity to benefit from increases in the value of the Underlying Fund but will continue to bear the risk of declines in the value of the Underlying Fund. The premiums received from the options may not be sufficient to offset any losses sustained from the volatility of the Underlying Fund over time. The ETF will be subject to capital gain taxes, ordinary income tax and other tax considerations due to its writing covered call options strategy.
Buffer ETFs: 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 Funds are actively managed and do not seek to replicate the performance of a specified index. The Fund may have a higher portfolio turnover than funds that seek to replicate the performance of an index.
BALI: When the Fund sells call options on a large cap equity index, it receives a premium but it takes on the risk that these options may reduce any profit from increases in the market value of the long equity positions held by the Fund. Any such reduction in profits would be the difference between the payoff of the call option and the premium received. The Fund would also retain the risk of loss if the long equity positions decline in value. The premiums received from the options may not be sufficient to offset any losses sustained from the long equity positions. Factors that may influence the value of the options generally include the underlying asset’s price, interest rates, dividends, the actual and implied volatility levels of the underlying asset’s price, and the remaining time until the options expire, among others. The value of the options written by the Fund typically do not increase or decrease at the same rate as the underlying asset’s price on a day-to-day basis due to these factors. The Fund is actively managed and does not seek to replicate the performance of a specified index. The Fund may have a higher portfolio turnover than funds that seek to replicate the performance of an index. The Fund's use of derivatives may reduce the Fund's returns and/or increase volatility and subject the Fund to counterparty risk, which is the risk that the other party in the transaction will not fulfill its contractual obligation. The Fund could suffer losses related to its derivative positions because of a possible lack of liquidity in the secondary market and as a result of unanticipated market movements, which losses are potentially unlimited. There can be no assurance that the Fund's hedging transactions will be effective.
Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities. Principal of mortgage- or asset-backed securities normally may be prepaid at any time, reducing the yield and market value of those securities. Obligations of US govt. agencies are supported by varying degrees of credit but generally are not backed by the full faith and credit of the US govt. Securities with floating or variable interest rates may decline in value if their coupon rates do not keep pace with comparable market interest rates. The Fund’s income may decline when interest rates fall because most of the debt instruments held by the Fund will have floating or variable rates.
Mortgage-backed securities ("MBS") and commercial mortgage-backed securities ("CMBS") are subject to prepayment and extension risk and therefore react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly and significantly reduce the value of certain mortgage-backed securities.
Collateralized Debt Obligations ("CDOs") carry additional risks including, but not limited to: (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments; (ii) the risk that the collateral may default or decline in value or be downgraded, if rated by a nationally recognized statistical rating organization; (iii) the Fund may invest in tranches of CDOs that are subordinate to other tranches; (iv) the lack of a readily available secondary market for CDOs.
International investing involves risks, including risks related to foreign currency, limited liquidity, less government regulation and the possibility of substantial volatility due to adverse political, economic or other developments. These risks often are heightened for investments in emerging/developing markets, in concentrations of single countries or smaller capital markets. Funds that concentrate investments in specific industries, sectors, markets or asset classes may underperform or be more volatile than other industries, sectors, markets or asset classes and the general securities market. Small-capitalization companies may be less stable and more susceptible to adverse developments, and their securities may be more volatile and less liquid than larger capitalization companies. Investments in technology industries may be affected by limited product lines, markets or financial resources. Technology industries are rapidly changing and stocks of these companies may be more volatile than the stock market in general.
A fund's environmental, social and governance (“ESG”) investment strategy limits the types and number of investment opportunities available to the fund and, as a result, the fund may underperform other funds that do not have an ESG focus. A fund's ESG investment strategy may result in the fund investing in securities or industry sectors that underperform the market as a whole or underperform other funds screened for ESG standards. In addition, companies selected by the index provider may not exhibit positive or favorable ESG characteristics.
Actively managed funds do not seek to replicate the performance of a specified index. Actively managed funds may have higher portfolio turnover than index funds.
The iShares Funds are not sponsored, endorsed, issued, sold or promoted by, ICE Data Services, LLC, ICE Data Services, LLC, S&P Dow Jones Indices LLC. None of these companies make any representation regarding the advisability of investing in the Funds. BlackRock Investments, LLC is not affiliated with the companies listed above.
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. There is no guarantee that any strategies discussed will be effective.
The iShares and BlackRock Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).
©2024 BlackRock, Inc. or its affiliates. All rights reserved. BLACKROCK and iSHARES are trademarks of BlackRock, Inc., or its affiliates. All other trademarks are the property of their respective owners.
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