Are investors starting to get cold feet waiting out interest rate issues? The Dow dropped more than 300 points Wednesday as further Fed comments suggested that higher for longer is as serious as it sounds. As that dawns on a growing number of investors, the stock market could suffer from those nerves about macro issues. Those factors may speak to the case for a hedged equity ETF like PHEQ.

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The Parametric Hedged Equity ETF (PHEQ) could play that role for certain investors. The strategy looks at individual U.S. large-cap stocks, aiming to broadly replicate the attributes of a market-cap-weighted index of the 50 largest U.S. firms. In doing so, however, it also crafts a laddered options strategy to limit losses.

The hedged equity ETF aims to mitigate losses via an options overlay hedging strategy. It looks to limit downside risk after the first 10% drop, to as much as 30%. In total, it creates four different defined outcome periods for each year. The strategy distributes dividends each quarter, while also incorporating tax loss harvesting when needed.

So, how has that strategy performed in recent times? PHEQ has returned about 5.8% YTD, per Morgan Stanley data. Managed by Parametric, it has also returned 12.2% since inception. Charging 29 basis points, it has gathered a solid $33 million in AUM since its launch.

So, what role can it play in a portfolio? For those who believe the economy may yet face a hard landing, PHEQ’s limit on losses would help. While retaining its exposure to equities broadly, its cap on losses could make it a worthwhile add at the edge of an overall portfolio.

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