BlackRock's 'Accelerated' ETF Aims at Topping IVV
iShares’ TWOX, aimed at doubling the return of the S&P 500, also sets an initial 5.8% quarterly performance cap.
BlackRock Inc., the world’s largest ETF issuer, launched its first so-called "accelerated" exchange-traded fund, aimed at doubling the performance of the firm’s giant S&P 500 tracker, the iShares Core S&P 500 ETF (IVV).
The iShares Large Cap Accelerated ETF (TWOX) was little changed in its first day of trading on the CBOE Thursday. It started with $10 million, according to the company’s fund description.
Investors have poured billions over the past few years into funds launched with the goal of topping the return of an index or a stock, typically referred to as leveraged funds. BlackRock calls TWOX its first “accelerated” ETF, saying in a document that it differs from the daily return focus of leveraged funds with a quarterly return emphasis. TWOX also differs in that it caps quarterly gains, with the cap for the current quarter at about 5.8%.
In 2021, Innovator Capital Management issued a handful of what it called accelerated ETFs, including the Innovator U.S. Equity Accelerated ETF – January (XDJA), which aimed to at least double the S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust (QQQ).
TWOX Tracks $582 Billion IVV
TWOX will track the world’s third-largest ETF, the $581.6 billion IVV, which gained 24% over the past year. IVV investors would have made roughly 6% gains each quarter, meaning the leverage would not have been required.
Its 50-basis point management fee appears well below the typical cost of a similar fund. Fund managers buy and sell options to outpace IVV.
New York-based BlackRock, whose iShares business manages 414 ETFs valued at $3.01 trillion, referred to TWOX as an outcome-oriented ETF, and said those funds have grown to a $160 billion portion of the ETF universe from $5 billion five years ago.
The fund comes as “uncertainty associated with trade and international policy could lead to slower growth,” the firm said in a statement.