BlackRock launches rival ETF to JP Morgan’s JEPI

Oct 5th, 2023 | By | Category: ETF and Index News

BlackRock has introduced its latest addition to the active ETF space – the BlackRock Advantage Large Cap Income ETF (BALI US).

Rachel Aguirre, Head of US iShares Product at BlackRock

Rachel Aguirre, US Head of iShares Product at BlackRock.

Listed on Cboe BZX Exchange, BALI aims to generate a substantial monthly income for investors while optimizing income and growth within a risk-managed framework.

The strategy, which is managed by Raffaele Savi, Global Head of Systematic at BlackRock, consists of delivering direct access to a subset of US dividend-paying stocks while further enhancing income by opportunistically selling call options on the S&P 500 Index.

The premiums from the call options provide regular monthly income; however, the call options also limit the fund’s ability to fully participate in potential increases in the value of the equity portfolio.

BlackRock notes, however, that BALI’s market exposure is carefully managed including by going long on futures referenced to large-cap US equity indices in order to cap potential losses stemming from the short S&P 500 call options.

Rachel Aguirre, US Head of iShares Product at BlackRock, highlighted that BALI was developed to satisfy the increasing client demand for active ETF strategies, especially in volatile market conditions.

Aguirre said: “As a powerful addition to our active ETF lineup, BALI is another testament to the firm’s ability to match our unparalleled expertise in ETFs with seasoned portfolio managers to meet our clients’ evolving needs.

“BALI also marks the latest offering in our growing suite of options-based ETFs which includes fixed income Buy-Write strategies and buffer strategies, reflecting the growing demand for solutions that help investors achieve specific outcomes. The fund furthers our commitment to providing choice and enhancing access to innovative solutions for our clients.”

BALI’s strategy draws inspiration from the success of JP Morgan’s Equity Premium Income ETF (JEPI US), a similar options-writing ETF that has grown to $29.0 billion in assets since its launch in May 2020, having more than doubled in size over the past year alone.

BALI comes with an expense ratio of 0.35%, aligning itself with JEPI in terms of fees.

While BALI and JEPI share similarities in their income generation strategies, there are differences in their underlying holdings. Specifically, BALI’s focus on dividend-paying stocks offers investors a diversified approach to income generation whereas JEPI tends to target lower volatility stocks, regardless of whether they pay dividends, providing a distinct contrast in investment philosophies.

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