Exchange-traded Funds  

BlackRock taps into fixed income ETF demand with global fund launch

BlackRock taps into fixed income  ETF demand with global fund launch

BlackRock has launched a global aggregate bond exchange-traded fund (ETF).

The investment management firm claims its iShares Global Aggregate Bond Ucits ETF is a cost-effective way to achieve exposure to investment-grade bonds, spread across currency, region and sector.

BlackRock said the move was in response to the number of investors who are increasingly diversifying their bond allocation to protect their portfolios from potential sudden market moves. 

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The firm pointed to a recent survey by KPMG, which found that 60 per cent of the wealth managers and advisers polled still wanted to use fixed income products in portfolio construction, despite bond valuation concerns.

BlackRock said to date some $142bn (£106bn) had been ploughed into bond ETFs, as investors increasingly used index products to gain exposure to bonds, as wellas equities.

The iShares Global Aggregate Bond Ucits ETFis physically replicating andhas a total expense ratio of0.1 per cent.

The product will track the Bloomberg Barclays Global Aggregate Index, which provides exposure to treasuries, government-related corporate and securitised fixed-rate bonds from both developed and emerging market companies.

 

Provider view:

Brett Olson, head of iShares fixed income Emea, said: “This ETF provides access to broad fixed income exposure, meaning investors can avoid the time and resource-consuming task of picking out individual bonds.

“As the broader fixed income market continues to evolve, investors are increasingly seeking the diversification and flexibility that ETFs offer, and using them alongside traditional security selection. 

“Our 84-strong bond Ucits ETF range provides investors with fixed income building blocks that can act as ballast against equity market risk, while pursuing a consistent income.”

Adviser view:

Darren Cooke, chartered financial planner at West Yorkshire-based Red Circle Financial Planning, said: “Advisers are looking at ways to diversify away from the UK. I have found 30 other ETF and open-ended investment company funds in that space doing slightly different things. 

“It looks like a bit of a crowded space, but the cheapest alternative I have seen is at the 0.2 [per cent] mark. But this one is competitively priced at 0.1 [per cent].”

Charges:

Expense ratio of 0.1 per cent.

Verdict:

As the popularity of ETFs continues, there will always be the question of how well a passive approach works for bonds  compared with equities, with basic indices offering the greatest exposure to the largest borrowers in the market. Although there are several ETF products out there, BlackRock is doing its utmost to stand out on price.