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Equity
Mar 27, 2025|ByIgor Zamkovsky, CFA
Discover what is behind the growth of outcome ETFs and why they can be a powerful tool within your practice.
Key takeaways
- BlackRock projects that U.S. outcome ETFs assets under management will surge to $650 billion by 2030 — more than three times its current size.1
- Outcome ETFs help investors achieve specific goals like income, targeted downside protection, and enhanced growth, while providing a cost-effective and convenient way to access options-based strategies.
- Outcome ETFs help empower investors to tackle macro uncertainty, offering features such as the potential for income or downside protection within a certain range, and can serve as a core building block to help address complex portfolio challenges.
The changing market landscape
The markets have changed a lot in the last few years and so too are the ways investors look to implement strategies that align with their goals. As more and more clients are looking for specific investment outcomes, innovation has made it easy to incorporate these types of strategies within ETFs.
Outcome-oriented strategies
The two main ingredients of Outcome ETFs are exposure to an underlying asset, such as an ETF that seeks to track an index and options on that underlying asset to help deliver the specific goals.
1. Enhanced income
Outcome ETFs known as buy-write ETFs, can generate additional income through options strategies, such as covered calls. This makes them an attractive option for income-focused investors.
2. Targeted downside protection
Outcome ETFs known as buffer ETFs, utilize options strategies to pursue specific investment goals like targeted downside protection. This helps investors mitigate losses during market downturns as represented by the Underlying ETF, while still allowing for some upside potential. 2
3. Growth
Outcome ETFs known as accelerated strategy ETFs, can target enhanced growth by using options to create unique payoff structures. These ETFs allow investors to participate in market gains up to a certain point, making them a powerful tool when markets experience periods of moderate growth as represented by the underlying ETF. 2
Rapid growth of outcome ETFs
As clients seek to implement these strategies, outcome ETF AUM has skyrocketed to $181 billion in 2024 from $5 billion in 2019.3 The category’s AUM was the fastest growing in 2024, expanding 58% from the prior year.4
Convenience and cost-effectiveness
While many investors may be familiar with options strategies, having them available inside the ETF wrapper provides a new, convenient and cost-effective avenue for investor access. Outcome ETFs are also designed to align with important investment goals, like generating income or targeted downside protection.
Future growth projections
Given their ability to provide investors with the potential for a specific outcome in a single ticker, we expect outcome ETFs to continue expanding and the category within the U.S. to more than triple to $650 billion by 2030.5
We expect U.S. outcome ETFs to reach $650 billion by 2030³
Source: BlackRock, Morningstar as of 12/31/2024. Estimates include scenario calculations based on proprietary research by BlackRock Global Product Solutions. Industry projections assume the continued evolution of the options ecosystem and market structure to support the growth of outcome ETFs at scale. These figures are for illustrative purpose only and there is no guarantee the projections will come to pass.
This expected growth comes at the intersection of product innovation, changing demographics and market dynamics.
Since 2019, nearly 500 outcome ETFs have been launched, and in 2024 alone represented 27% of all new ETF listings.6 This growth is driven by policy and macroeconomic uncertainty, higher market volatility, and demographic shifts, such as the increasing number of retirees globally.
Education and adoption
While outcome ETFs have grown rapidly in the last few years, nearly 90% of advisors don’t use them yet.7 We believe outcomes ETFs can play an important role in portfolio construction, but more education is needed so investors can best utilize these strategies. This paper aims to explore outcome ETFs and the options strategies within them, including how they can be used by investors seeking to achieve investment goals such as income, targeted protection, or enhanced growth.
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Igor Zamkovsky, CFA
Senior Strategist, Outcome ETFs
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1. Source: BlackRock, Morningstar as of 12/31/2024. Estimates include scenario calculations based on proprietary research by BlackRock Global Product Solutions. Industry projections assumes the market ecosystem for options will scale proportionately to support the growth of outcome ETFs. These figures are for illustrative purpose only and there is no guarantee the projections will come to pass
2. Investors may experience different outcomes if Fund shares are not held for the entire hedge period or outcome period.
3. Source: BlackRock, Morningstar, as of 12/31/2024. 82% growth rate based on the 6-year compound annual growth rate (CAGR) of AUM for U.S. Outcome ETFs. Outcome ETF AUM represented by a universe of 594 U.S.-based ETFs. including 570 solutions-oriented strategies as categorized including derivative income and downside protection and 24 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.
4. BlackRock as of 12/31/24. Based on YTD organic growth, calculated as YTD flows divided by 2023 assets under management. Calculated for U.S. listed ETFs only.
5. Source: BlackRock, Morningstar as of 12/31/2024. Estimates include scenario calculations based on proprietary research by BlackRock Global Product Solutions. Industry projections assumes the market ecosystem for options will scale proportionately to support the growth of outcome ETFs. These figures are for illustrative purpose only and there is no guarantee the projections will come to pass.
6. Source: Morningstar as of December 31, 2024. Number of funds launched is counted after Rule 6c-11 went into effect on December 23, 2019.
7. Source: BlackRock. Advisor data as of 12/31/2024. Analysis includes 22,042 advisor models collected by BlackRock.
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 the iShares Fund and BlackRock Fund prospectus pages. Read the prospectus carefully before investing.
Investing involves risks, 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 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 Buffered Funds will be successful in their strategy to provide downside protection against Underlying ETF losses. The Funds do 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. 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 Funds seeks to provide. In periods of extreme market volatility, the Funds' return may be subject to downside protection significantly lower than the Buffer and an upside limit significantly below the Approximate Cap (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.
Accelerated ETFs: There can be no guarantee that the Accelerated Funds will be successful in their investment strategy, and investors may lose some or all of their money. The outcomes are intended to be realized only by investors who hold Fund shares at the outset of the Outcome Period (as defined in the prospectus) and continue to hold the shares through the end of the Outcome Period. An investor who buys Fund shares after the start of an Outcome Period may experience lesser returns and may be exposed to greater losses than that of the Underlying ETF. An investor who sells Fund shares before the end of an Outcome Period may not fully realize the Accelerated Return. The Accelerated Funds do not provide a buffer, floor or other protection against losses experienced by the Underlying ETF. The Funds are subject to an Approximate Cap (the “Cap”), whose level depends on prevailing market conditions at the time the Cap is set at the beginning of the Outcome Period and may vary, sometimes significantly, from one Outcome Period to the next. The Accelerated Funds will not participate in gains of the Underlying ETF that are above the Cap.
The Buffered and Accelerated Funds invest 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 Funds' NAV may not increase or decrease at the same rate as the underlying ETF’s share price.
Actively managed funds do not seek to replicate the performance of a specified index, may have higher portfolio turnover, and may charge higher fees than index funds due to increased trading and research expenses.
Investment comparisons are for illustrative purposes only. To better understand the similarities and differences between investments, including investment objectives, risks, fees and expenses, it is important to read the products' prospectuses.
Diversification and asset allocation may not protect against market risk or loss of principal
This material contains general information only and does not take into account an individual's financial circumstances. This information should not be relied upon as a primary basis for an investment decision. Rather, an assessment should be made as to whether the information is appropriate in individual circumstances and consideration should be given to talking to a financial professional before making an investment decision.
This material is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. The opinions expressed are as of the date indicated and may change as subsequent conditions vary. The information and opinions contained in this material are derived from proprietary and nonproprietary sources deemed by BlackRock to be reliable, are not necessarily all-inclusive and are not guaranteed as to accuracy. As such, no warranty of accuracy or reliability is given and no responsibility arising in any other way for errors and omissions (including responsibility to any person by reason of negligence) is accepted by BlackRock, its officers, employees or agents. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections and forecasts. There is no guarantee that any of these views will come to pass. Reliance upon information in this material is at the sole discretion of the viewer.
ETFs are obliged to distribute portfolio gains to shareholders by year-end. These gains may be generated due to index rebalancing or to meet diversification requirements. Trading shares of ETFs may also generate tax consequences and transaction expenses. Past distributions are not indicative of future distributions.
This material does not constitute any specific legal, tax or accounting advice. Please consult with qualified professionals for this type of advice.
The Funds are distributed by BlackRock Investments, LLC (together with its affiliates, "BlackRock").
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