income exposures in an ETF.
The new funds represent a number of “firsts.” iShares is offering the first fixed income ETFs that provide exposure to specific industry sectors, certain sectors within the mortgage-backed securities marketplace and high credit quality corporate bonds.
“We are launching these new iShares ETFs specifically in response to growing demand for liquid and transparent fixed income investments that are easy to buy and trade. Investors have shown a clear interest in ETFs as they readjust their fixed income portfolios,” said Matt Tucker, Head of iShares Fixed Income Investment Strategy at BlackRock.
According to BlackRock Investment Institute’s ETP Landscape, global flows into fixed income ETFs reached record levels in January with the products attracting $9 billion in net new assets.
“Fixed income ETFs are truly an innovative development giving investors the ability to adjust their portfolios to express their investment views and help gain control in a low yield market environment,” Matt Tucker said. “Based on well-regarded industry benchmarks and drawing on BlackRock’s fixed income expertise, these new products expand the ability of investors and advisors to customize fixed income portfolios.”
Four of the new iShares fixed income ETFs being launched today reflect strong investor interest in funds that offer access to market segments other than broad, aggregate bond market exposure. These products include:
- iShares Aaa – A Rated Corporate Bond Fund (NYSEArca:QLTA) – The first ETF to provide single-trade access to the highest quality corporate debt issuers, broadly diversified across sectors and maturities. The fund is designed to track the Barclays Capital U.S. Corporate Aaa – A Capped Index
- iShares Barclays U.S. Treasury Bond Fund (NYSEArca:GOVT) – Offers exposure to a broad range of U.S. Treasuries maturities (1-30 years) in one trade. Designed to track the Barclays Capital U.S. Treasury Bond Index, the new fund allows investors to shift towards U.S. Treasuries in times of negative market sentiment.
- iShares Barclays CMBS Bond Fund (NYSEArca:CMBS) – The first ETF to provide exposure to investment grade commercial mortgage-backed securities. The new iShares ETF can complement the iShares Barclays MBS Bond Fund (NYSE: MBB) and help investors express tactical views on the commercial real estate market.
- iShares Barclays GNMA Bond Fund (NASDAQ:GNMA) – The first ETF to offer a flexible and cost-efficient way to invest in a diversified portfolio of fixed-rate, mortgage-backed securities issued by the Government National Mortgage Association (GNMA). GNMAs are the only mortgage securities explicitly supported by the full faith and credit of the U.S. government.
Three of the new iShares ETFs represent the first sector fixed income ETFs. “For the first time, investors and advisors can fine tune sector exposure in their fixed income portfolios just like they have done in their equity portfolios,” Matt Tucker said. “Now they can overweight and underweight sectors and do sector rotation to capture bond sector returns over business cycle changes.” These products are:
- iShares Financials Sector Bond Fund (NYSEArca:MONY) – The first ETF to offer targeted exposure to investment grade U.S. corporate financial sector bonds. Today 33% of the U.S. corporate bond market comprises financials sector bonds. The new fund is designed to track the Barclays Capital U.S. Financial Institutions Capped Bond Index.
- iShares Industrials Sector Bond Fund (NYSEArca:ENGN) – The first ETF to express a view on the industrial sector, which comprises 56% of the U.S. corporate bond market. The new fund is designed to track the Barclays Capital U.S. Industrial Bond Index.
- iShares Utilities Sector Bond Fund (NYSEArca:AMPS) – The first ETF to provide a flexible and cost-efficient way to express a view on the U.S. utility corporate bond sector. It is designed to track the Barclays Capital U.S. Utility Bond Index.
“As investors continue to seek more stable returns, they will increasingly rethink their fixed income portfolios. And, we believe investors will rely more and more on ETFs for their liquid access and transparency,” said Tucker. “We continue to research ways to address this growing need by rounding out the iShares fixed income lineup.”
Editor’s Notes: Details about the new funds can be found using the links below. iShares Barclays U.S. Treasury Bond Fund (NYSEArca: GOVT) iShares Barclays CMBS Bond Fund (NYSEArca: CMBS) iShares Financials Sector Bond Fund (NYSEArca: MONY) iShares Industrials Sector Bond Fund (NYSEArca: ENGN) iShares Utilities Sector Bond Fund (NYSEArca: AMPS) iShares Aaa – A Rated Corporate Bond Fund (NYSEArca: QLTA) iShares Barclays GNMA Bond Fund (NASDAQ: GNMA)
About BlackRock: BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At December 31, 2011, BlackRock’s AUM was $3.513 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 December 31, 2011, the firm has approximately 10,100 employees in 27 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
iShares is the global product leader in exchange traded funds with over 500 funds globally across equities, fixed income and commodities, which trade on 20 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, tax efficiency 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.
Carefully consider the funds’ investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the funds’ prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737) or by visiting www.iShares.com. Read the prospectus carefully before investing. Investing involves risk, including possible loss of principal.
Bonds and bond funds generally decrease in value as interest rates rise. The Funds may be subject to credit risk, which refers to the possibility that the debt issuers may not be able to make principal and interest payments or may have their debt downgraded by ratings agencies. In addition to the normal risks associated with investing, narrowly focused investments typically exhibit higher volatility. Commercial mortgage-backed securities (“CMBS”) and mortgage-backed securities (“MBS”) represent interests in “pools” of mortgages and are subject to credit, prepayment and extension risk, and therefore react differently to changes in interest rates than other bonds. Small movements in interest rates may quickly and significantly reduce the value of CMBS and MBS. An investment in the Fund(s) is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Diversification may not protect against market risk.
This material represents an assessment of the market environment at a specific time and is not intended to be a forecast of future events or a guarantee of future results. This information should not be relied upon by the reader as research or investment advice regarding the funds or any security in particular.
The strategies discussed are strictly for illustrative and educational purposes and should not be construed as a recommendation to purchase or sell, or an offer to sell or a solicitation of an offer to buy any security. There is no guarantee that any strategies discussed will be effective.
Transactions in shares of the iShares Funds will result in brokerage commissions and will generate tax consequences. iShares Funds are obliged to distribute portfolio gains to shareholders. Shares of the iShares Funds may be sold throughout the day on the exchange through any brokerage account. However, shares may only be redeemed directly from a Fund by Authorized Participants, in very large creation/redemption units. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained.
The iShares Funds (“Funds”) are distributed by SEI Investments Distribution Co. (“SEI”). BlackRock Fund Advisors (“BFA”) serves as the investment advisor to the Funds. BlackRock Investments, LLC (“BRIL”), assists in the marketing of the Funds. BFA and BRIL are affiliates of BlackRock, Inc., none of which is affiliated with SEI.
The iShares Funds are not sponsored, endorsed or issued by Barclays Capital, nor does this company make any representation regarding the advisability of investing in the Funds. Neither SEI, nor BlackRock Institutional Trust Company, N.A., nor any of their affiliates, are affiliated with the company listed above.
* Not FDIC Insured * No Bank Guarantee * May Lose Value