BlackRock has launched two new fixed income exchange traded funds (ETFs) providing investors with more choice in US bond exposures.
The iShares dollar 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.
The iShares dollar 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.
Brett Olson, head of iShares fixed income EMEA at BlackRock, said: “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.”
Jason Hollands, managing director for business development and communications at Tilney Investment Management Services, said: "While it is good to see BlackRock further building out is product range, in the current environment we feel US fixed income has limited appeal and there are also currency risks for sterling investors should the pound clawback some of the ground it has lost versus the dollar over the last year."
Laith Khalaf, senior analyst at Hargreaves Lansdown, added ETFs have risen in popularity in recent years as investors have looked to passive options to gain exposure to international stock markets.
He said there are currently some great plain vanilla ETFs out there, but there are also some more complicated products which track little known indices and so investors do need to make sure they fully understand what the ETF is seeking to do before parting with their money,
Mr Khalaf said: "The two BlackRock products are fairly niche in terms of the market they are investing in, and so I suspect will mainly be of interest to institutional investors looking for exposure to US fixed income securities."
stephanie.hawthorne@ft.com
