BlackRock Inc. today launched its own version of target-maturity exchange-traded funds, which are designed to provide access to the corporate bond market and help advisers and investors apply fixed-income-laddering strategies.
The first series of iSharesBonds Corporate ex-Financial Term ETFs include maturity dates of 2016 (IBCB), 2018 (IBCC), 2020 (IBCD) and 2023 (IBCE).
Similar to an individual bond, the ETFs will liquidate on the maturity dates. These particular ETFs will liquidate in March of the year of maturity.
“We think this will be appealing to institutional investors that want an ETF that looks like a bond,” BlackRock spokeswoman Melissa Garville said.
In 2010, BlackRock launched the industry's first target-maturity, or term, ETFs with the municipal bond series that currently has $300 million under management in ETFs maturing between 2013 and 2017.
Guggenheim Investments followed suit in 2010 with its BulletShares lineup of target-maturity ETFs for corporate and high-yield bonds.
The BulletShares lineup has grown to about $2 billion.
A key feature of the target-maturity ETFs is efficient access to a diversified pool of bonds that have a set maturity date.
“Bank treasurers are challenged to build diversified portfolios in an environment of low liquidity, low yields and interest rate volatility,” Matthew Tucker, head of iShares fixed-income-investment strategy, said in a statement.
While BlackRock is touting its new lineup as being geared toward institutional investors, the ETFs are also ideal for financial advisers looking to build laddered-bond portfolios.
The rollout of these types of target-maturity ETFs adds a fresh endorsement to the traditional bond-ladder strategy as a mean of protecting principal.
In an interview last month, Guggenheim's head of product development, Bill Belden, said education about these products should not be taken lightly.
“The BulletShares ETFs is not a strategy, it's a component of a strategy,” he said.