BlackRock Inc. is riding the popularity of its iShares iBonds ETF series with a suite of new ETFs that function as bond ladders.
The four ETFs, which will begin trading later this year, offer exposure to Treasury bonds, Treasury Inflation-Protected Securities, corporate bonds and high yield bonds.
Each ETF in the suite will hold iBonds ETFs to create a revolving bond ladder with a duration of one to five years.
While bond ladders typically go out a decade or more and BlackRock’s iBond ETFs currently extend out to 2034, the shorter duration built inside the iShares iBonds 1-5 Year Ladder ETFs is designed to target the current appetite among investors and financial advisors.
“Right now, one-to-five years is the most popular area of the iBonds, and we’ve gotten a lot of requests from people using the iBonds asking us to try something that’s rolling,” said Karen Veraa-Perry, Head of U.S. iShares Fixed Income Strategy at New York-based BlackRock.
The defined maturity iBonds ETFs were introduced in 2010 to help investors create their own bond ladders. At more than $32 billion across the iBonds ETFs, Veraa-Perry said it has been a popular vehicle, especially among financial advisors.
But even though the ETFs eliminate the challenge of buying individual bonds and holding them to maturity, investors and advisors still have to manage the ladders as the iBonds ETF rungs mature and roll off.
Veraa-Perry said BlackRock has even seen a trend among advisors of outsourcing the management of the iBonds ETF ladders.
“It’s primarily been advisors using iBonds ETFs, and mostly at the wire houses,” she said. “We think this could also appeal to direct investors.”
The four new laddering ETFs: the iShares iBonds 1-5 Year Treasury Ladder ETF (LDRT), the iShares iBonds 1-5 Year TIPS Ladder ETF (LDRI), the iShares iBonds 1-5 Year Corporate Ladder ETF (LDRC) and the iShares iBonds 1-5 Year High Yield and Income Ladder ETF (LDRH) will not charge an overlay fee on top of the underlying iBonds ETFs.
New York-based BlackRock is the world’s biggest ETF issuer, with $3.04 trillion in 438 funds.