ETFs are available for just about any fashionable market. Better still, there are now products that give you the certainty of never losing your capital. Blackrock (with iShares) recently launched one on the S&P 500.

In concrete terms, how does it work?

If you invest in iShares Large Cap Max Buffer ETFs and the underlying index (the S&P 500) falls, your investment will be protected and will not lose value. On the other hand, if the market rises, you'll benefit from any increases until you reach the set ceiling. Beyond this ceiling, even if the market continues to rise, your return will not increase any further.

These ETFs are particularly interesting in scenarios of high market volatility. In a very negative market (as in 2022), they offer complete protection, preventing investors from incurring any losses. In a very positive market, investors benefit from gains up to the set ceiling.

How the ETF works

Looking at the figures, the maximum annual return is 6.75% for the ETF with a hedging period running from July 1, 2024 to June 30, 2025, and 7.41% for the ETF with a hedging period running from October 1, 2024 to September 30, 2025.

Summary characteristics of iShares hedged ETFs

The ETF can be purchased during its hedging period (e.g. December 5, 2024 for the ETF whose hedging period runs from July 1, 2024 to June 30, 2025). However, there is less time before the cap reset date (June 30, 2025) for the ETF to make gains. If the market has already risen significantly since the start of the hedging period, the time remaining for future growth is shorter.

This ETF is therefore an option for those wishing to benefit from the dynamism of equities with limited risk. Fees amount to 0.50%, which is relatively moderate for a product that offers full downside hedging.

Other issuers get in on the act

ETF and structured products provider Innovator specializes in hedged ETFs. The company offers a whole range of products, such as the Innovator Growth-100 Power Buffer ETF, which seeks to replicate the performance of the Nasdaq-100 up to a maximum of 14.72%, while protecting investors against 15% losses over the defined period.

Innovator offers a variety of hedged products on different indices, with different levels of hedging and therefore capped performance. The greater the hedge, the lower the capped return. We could almost speak of personalized investment. The downside is that liquidity is still rather low.

For the time being, Innovator's products are also reserved for US investors.