5 Questions on Buffer ETFs

• Uncertain markets have challenged advisors managing diversified portfolios for their clients.
• Buffered strategies can help advisors mitigate risk by targeting a level of downside protection, in exchange for capping upside potential.
• iShares Buffer ETFs can provide efficient access to these strategies, mitigating the cumbersome, time intensive nature of managing options strategies individually, and the typical expenses and illiquidity of structured notes.
• Our Buffer ETF range is designed with buy-and-hold investors in mind, with the lowest expense ratio in the industry ¹ and quarterly reset frequencies to help clients stay invested over the long term.

QUESTION #1: How are investors managing risk amid uncertain markets?

As many investors experienced first-hand in 2022, simply diversifying across stocks and bonds may not provide enough protection against changing market conditions. But at the same time, sitting on the sidelines or trying to time the markets can prevent investors from achieving their financial goals. Near-record amounts of money market assets suggest that investors remain fearful, as the risk of recession looms large and interest rates may continue to rise further.²

Given this uncertainty, we believe more precise ways of managing downside risk can help investors stay invested during periods of market volatility.

QUESTION #2: What are buffer strategies and how can they help investors pursue their financial goals?

A buffer strategy utilizes options to seek to provide a targeted level of downside protection, should markets experience negative returns. The tradeoff for this downside protection is that the strategy is limited on its upside potential over each hedge period. Together, this approach can help investors stay invested by mitigating the pain of major selloffs and ultimately seek clearer financial outcomes.

QUESTION #3: Why use ETFs to get exposure to buffer strategies?

Historically, buffer strategies have been accessed directly through advisors implementing an option strategy for clients themselves, or through structured notes. Managing options strategies can be cumbersome, time intensive, and the price of an error can be quite steep. Conversely, structured notes can be expensive and illiquid.

iShares Buffer ETFs help address these challenges. Our Buffer ETFs are managed by a team of BlackRock portfolio managers with over 55 years of collective experience, navigating the nuances of executing options trades for investors. At the same time, iShares ETFs offer intraday liquidity, and all at the lowest expense ratio in the industry of 0.50%.³

QUESTION #4: What are the buffer ranges for the iShares ETFs?

We currently offer two Buffer ETFs. Both track U.S. large cap equity returns, represented by the iShares Core S&P 500 ETF, with each targeting a different level of downside buffer. The iShares Large Cap Moderate Buffer ETF (IVVM) seeks to provide a downside buffer of approximately the first 5% of underlying ETF losses on a quarterly basis and the iShares Large Cap Deep Buffer ETF (IVVB) seeks to provide a downside buffer of approximately 5-20% of losses over each calendar quarter. The buffer ranges are funded by capping upside potential.

QUESTION #5: Who should consider using iShares Buffer ETFs?
These buy-and-hold ETFs are designed to be used in a long-term, strategic allocation within a portfolio. Where it fits within a portfolio depends on the investor’s overall risk tolerance and other holdings in the portfolio. We believe there are three primary ways that Buffer ETFs can be used in portfolios:

• Investors seeking to reduce equity drawdown risk may choose to use iShares Buffer ETFs to replace a portion of Core Equity exposure.
• Investors with a substantial allocation to fixed income, think investors at or close to retirement, may desire access to equity growth. Shifting a portion of fixed income allocation to iShares Buffer ETFs may provide the investor with moderate growth while still managing portfolio risk.
• Finally, outcome-oriented strategies like Buffer ETFs can act as an alternative to more expensive and illiquid alternatives designed to modify portfolio returns.

In all three cases, we believe iShares Buffer ETFs can help investors mitigate risk while seeking clearer outcomes.