BlackRock is looking to extend its reach in the bond ETF space with a new suite of fund-of-funds to let advisors deploy a classic portfolio management strategy more easily across a handful of key fixed income classes.
The global asset management giant led by Larry Fink, which recently reached an all-time high of $11.5 trillion in assets, is planning to introduce a new suite of defined maturity bond ladder ETFs, expanding its iShares iBonds ETF franchise.
The forthcoming iShares iBonds 1-5 Year Ladder ETFs are designed to provide financial advisors with a simplified approach to bond laddering, packaged within an ETF.
“In 2010, BlackRock pioneered defined maturity ETFs with the introduction of iBonds ETFs, helping advisors build bond ladders and efficiently manage multiple client accounts,” Karen Veraa, head of US iShares fixed income strategy at BlackRock, said in a statement reviewed by InvestmentNews. She added that the new products will offer “a turnkey solution to bond laddering while making investing easier and more affordable.”
BlackRock's initial slate of iShares iBonds Ladder ETFs, which will be listed on the NYSE Arca Exchange, include:
According to registration documents, the ETFs will come with net expense ratios ranging from 0.07% for LDRT to 0.35% for LDRH.
Describing them as "a seamless extension to the iBonds franchise," Veraa highlighted the new iShares iBonds Ladder ETFs' ability to help advisors and their clients manage interest rate risk, seek higher yields, and enhance portfolio diversification, adding another tool for advisors aiming to navigate evolving bond markets.
The new suite will consist of four fund-of-funds ETFs, each focusing on US Treasuries, investment-grade bonds, high-yield bonds, and Treasury inflation-protected securities. Each ETF will aim to track a BlackRock index that allocates 20 percent to five iShares iBonds ETFs, spanning five consecutive termination years. These indexes will be rebalanced and reconstituted annually by replacing the current year’s maturing ETF with a new one terminating five years later.
While there are other bond ladder ETFs in the market, the upcoming iShares iBonds Ladder ETFs will be "a first for packaging of maturity term ETFs," a spokesperson for BlackRock told InvestmentNews. At present, the asset manager estimates the US term maturity bond ETF market alone represents $50 billion in assets.
The iShares iBonds ETF franchise, which has grown to more than $32 billion in AUM since inception, covers various asset classes such as US Treasuries, municipals, investment grade bonds, high yield bonds, and TIPS. Since launching its fixed-income ETF franchise, BlackRock has introduced 88 iShares iBonds ETFs, including 53 that are currently active.
Globally, BlackRock manages over $1 trillion in fixed income ETFs, reflecting a 40 percent growth since 2021. With the growing demand for bond ETFs, the firm expects total assets under management in bond ETFs to triple to $6 trillion by 2030.
The new funds are expected to launch before the end of 2024.
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