In the 45 years since 1980, the S&P 500 has delivered positive annual returns 34 times. But the market’s average intra-year drop in that time was 14%, meaning investors often endured some fairly nerve-wracking price swings along the way. And the bigger the swing, the bigger the test of conviction.

It can be tough not to sell down holdings or change course entirely when markets lurch lower. But exiting the market during turbulence often means missing out on the strongest rebound days. Over time, that tends to lead to worse outcomes.

Slotting in J.P. Morgan’s buffer ETFs alongside bonds, equities and alternative assets could help investors endure these ups and downs without being knocked off course. 

The need for alternative sources of diversification

The long-accepted way to smooth investment returns and manage volatility was to mix equities with bonds. Equities delivered growth; bonds provided ballast. Their correlation was negative; when one zigged, the other zagged.

That neat relationship has weakened since the pandemic. In 2022 as inflation spiked, stocks and bonds fell together – leaving balanced portfolios of 60% equities and 40% bonds with their worst year since 2008. And now? Bonds are still important, especially now yields are higher. But their role as diversifiers has become less reliable.

Investors still want and need equity growth, but it’s increasingly important to have other sources of diversification to cushion volatility. Buffer ETFs are one such tool: they don’t replace fixed income, but they can complement it by reshaping the way equity exposure is experienced.

How buffer ETFs work

Buffer ETFs are built to smooth the equity ride. Instead of full exposure to every rise and fall, they use options contracts to hedge the downside, in exchange for capping the upside. The goal is to provide enough upside to keep investors in the market, with enough protection to make the journey bearable.

That’s the basic idea. But not all buffer ETFs go about it in the same way, and this is where the J.P. Morgan approach stands out.

Always hedged ETFs, no matter when you invest

J.P. Morgan’s answer comes through two funds: the JPM US Hedged Equity Laddered Overlay Active UCITS ETF (HELO) and the JPM Nasdaq Hedged Equity Laddered Overlay Active UCITS ETF (HEQQ). Both take the core principles of buffer ETFs but add a distinctive twist.

Buffer ETFs typically use a single hedge for a specific period, such as one quarter, or one year, creating the risk that investors who join mid-cycle may not be fully covered until the hedge period resets. By contrast, HELO and HEQQ use three rolling hedges, each lasting three months and starting one month apart. This ‘laddered’ approach means the funds are always hedged. 

Investors are covered by three overlapping layers of protection, so that the hedging windows always combine to cover 100% of the portfolio. It’s a kind of insurance policy for equity exposure – protection that renews itself automatically, so you can expect the same outcome, whenever you join.

Similarly, as the market moves, the hedge window moves as well. This approach can offer more potential upside in an upward-trending or volatile market, while also moving the downside hedge if the market falls.

The aim of HELO and HEQQ is to put guardrails around the equity experience so that potential losses are limited if the market falls between 5% and 20% over any three-month hedged window. The hedging strategy does not, however, guarantee you will never lose money, and you may still experience losses outside this range.

Benefits of buffer ETFs for investors

The essence of HELO and HEQQ’s proposition is that an investor can enjoy around two-thirds of the equity market’s upside, with about half the volatility and beta. 

Beneath the hedge, both ETFs hold actively managed equity portfolios:

HELO invests in a diversified portfolio of U.S. large-cap companies, all identified using J.P. Morgan Asset Management’s active, research-enhanced equity investing process.

HEQQ provides an active exposure to Nasdaq-oriented equities – a market known for both growth potential and volatility.

Both ETFs have a TER of 0.50%.

A tried and tested strategy

Buffer ETFs remain in the early stages of adoption in Europe. In the US, though, they’re already well established. The US-listed HELO ETF has attracted more than $3 billion in assets. In Europe, J.P. Morgan has also managed the US Hedged Equity mutual fund since 2016. These new UCITS ETFs therefore bring a tried-and-tested strategy to ETF buyers in Europe.

At the helm is Hamilton Reiner, Head of US Equity Derivatives, who has been managing hedged equity strategies for decades, alongside co-manager Raffaele Zingone and a seasoned team of research analysts with an average 20+ years’ experience (as of June 2025).

Putting it to work

So, how can laddered buffers help nervous investors stay invested through volatility?

Take, for example, an investor nervous about US equity markets. A full equity allocation may feel uncomfortable or may not match the investor’s time horizon if they’re close to retirement.

It’s the sort of situation many investors know well: the temptation to sit it out in cash, weighed against the fear of missing market gains.

With HELO, this investor can stay in the market (or enter it for the first time) with the added reassurance of the options guardrails.

If stocks dip, they’re cushioned. If stocks soar, they still participate, but their gains are capped. The ride is steadier, making it mentally easier to stay invested.

Similarly, our hedged equity ETFs can play a compelling role in an overall portfolio by funding these solutions from a combination of equities and fixed income. This results in a similar level of risk, but increased upside potential. 

Embracing volatility with buffer ETFs

Markets will always be uncertain. Volatility is a feature, not a bug. For investors, the challenge is not to avoid it altogether, but to find the right ways to preserve long-term, wealth-building equity exposure.

That is what J.P. Morgan’s HELO and HEQQ buffer ETFs set out to do. They are designed to address today’s correlation challenges by offering equity participation with a built-in hedge against potential losses, for market falls between -5% to -20%. Over the long term, the aim is to provide roughly half the volatility and beta of the market, with two-thirds of the upside.

Volatility is inevitable, but by combining active stock selection with an ‘always on, always rolling’ hedge, HELO and HEQQ can help investors get invested and stay invested