iShares Announces Launch of Two New Inflation-Linked Bond Funds – iShares introduces the first global inflation-linked ETF
BlackRock, Inc. (NYSE:BLK) today announced that its iShares® Exchange Traded Funds (ETFs) business, the world’s largest manager of ETFs, has launched two new inflation-linked funds on the NYSE Arca. The new funds are the iShares Global Inflation-Linked Bond Fund (NYSE:GTIP) and the iShares International Inflation-Linked Bond Fund (NYSE:ITIP). GTIP and ITIP join the iShares Barclays TIPS Bond Fund (NYSE:TIP)–the first TIPS ETF to come to market–and the more recently launched iShares Barclays 0-5 Year TIPS Bond Fund (NYSE:STIP) on the iShares product line. In total, the four funds provide investors the ability to access inflation-linked bonds in the US as well as those from foreign countries.
”Just as investors use US TIPS to help protect domestic portfolios against inflation, they should consider using global inflation-linked bonds to help protect their global portfolios,” said Matthew Tucker, iShares Head of Fixed Income Investment Strategy at BlackRock. “A global investment approach requires a global inflation solution.”
“Inflation-linked bonds from foreign countries operate much like US TIPS,” said Matt Tucker. “While the calculation for adjusting principal and interest varies between countries, the concept is the same: the bonds are indexed to local consumer price indexes in order to help protect investors from the negative effects of inflation.”
“Global inflation may be an increasingly important part of portfolio construction going forward, as recent monetary policy raises the risk of inflation abroad,” said Russ Koesterich, iShares Chief Investment Strategist at BlackRock. “Countries to watch include the US, UK, Canada, and Australia in the developed world and China, India and Brazil in the emerging markets.”
GTIP is benchmarked to the BofA Merrill Lynch Global Diversified Inflation-Linked Index, and is the first of its kind in the exchange traded fund marketplace. The fund provides one-stop-shop access to global inflation-linked bonds. It includes exposure to the US, the UK, France, Italy and Brazil.
ITIP is benchmarked to the BofA Merrill Lynch Global ex-US Diversified Inflation-Linked Index. The fund does not include exposure to the US, but rather sizeable allocations to the UK, France, Italy, Australia and Brazil, among other countries. It can be paired with iShares Barclays TIPS Bond Fund (TIP) as part of a global inflation-linked bond strategy.
About iShares: iShares is the global product leader in exchange traded funds with over 460 funds globally across equities, fixed income and commodities, which trade on 19 exchanges worldwide. The iShares Funds are bought and sold like common stocks on securities exchanges. The iShares Funds are attractive to many individual and institutional investors and financial intermediaries because of their relative low cost and trading flexibility. Investors can purchase and sell shares through any brokerage firm, financial advisor, or online broker, and hold the funds in any type of brokerage account. The iShares customer base consists of the institutional segment of pension plans and fund managers, as well as the retail segment of financial advisors and high net worth individuals.
About BlackRock: BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2011, BlackRock’s AUM was $3.648 trillion. BlackRock offers products that span the risk spectrum to meet clients’ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of March 31, 2011, the firm has approximately 9,300 employees in 26 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com
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Bonds and bond funds will decrease in value as interest rates rise. TIPS can provide investors a hedge against inflation, as the inflation adjustment feature helps preserve the purchasing power of the investment. Because of this inflation adjustment feature, inflation protected bonds typically have lower yields than conventional fixed rate bonds and will likely decline in price during periods of deflation, which could result in losses. Government backing applies only to government issued securities, not iShares exchange traded funds.
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