Thirst for granularity driven by investors looking to be ‘active with passive’
BlackRock has launched two new fixed income exchange traded funds (ETFs) providing investors with greater granularity in US bond exposures.
iShares $ Intermediate Credit Bond UCITS ETF (ICBU) invests in a subset of US investment grade bonds, with maturity dates between one and 10 years. The fund provides exposure to a broad array of investment grade corporate, sovereign, supranational, local authority and non-US agency bonds. The fund offers income generation potential relative to US treasuries with similar maturities.
iShares $ TIPS 0-5 UCITS ETF (TIP5) invests in short-term Treasury Inflation-Protected Securities and aims to provide an inflation hedge with lower interest rate risk, while offering growth potential. The bonds included in the underlying index have a duration ranging between zero and five years and are US dollar denominated.
The global bond ETF industry achieved its best quarter on record with $44.5bn inflows in Q1 20171.
BlackRock now offers 86 bond ETFs in Europe, offering granular exposures across duration and risk levels.
Speaking at the annual bond ETF media event in London last week, Brett Olson, Head of iShares Fixed Income EMEA at BlackRock, said; “Our aim is to empower investors when investing in the bond markets, and more and more clients are coming to us with ideas for product launches. This thirst for granularity is symptomatic of a broader shift among asset allocators towards ‘being active with passive’ to meet their desired goals. We expect bond ETFs to become more engrained as the tool investors – from funds buyers to bond buyers – look to form part, or in many cases the basis, of their bond allocations.”
Chris Allen, European Fixed Income Portfolio Manager at BlackRock, said “Before bond ETFs came along, cash bonds and derivatives were the main tools we had to translate our views into portfolio allocation and generate alpha. As the selection and size of bond ETFs has grown, we now have an additional tool to consider to cost-effectively allocate to sectors. In addition, they are an invaluable source of daily information on where money’s going, and a means of managing the short terms flows in and out of our mutual funds.”
