BlackRock (NYSE:BLK), the world's largest asset manager, has announced its plan to launch a series of exchange-traded funds (ETFs) focused on Treasury inflation-protected securities (TIPS). The move, unveiled on Thursday, aims to address growing investor concerns about the impact of inflation on their purchasing power.
The ten new ETFs will be part of BlackRock's iShares iBonds range and will have maturities ranging from 2024 to 2033. This addition to the iBonds portfolio comes as the U.S. Federal Reserve remains committed to mitigating the rising cost of living in the country.
Karen Veraa, the head of U.S. iShares fixed-income strategy at BlackRock, stated that these TIPS-defined maturity bond ETFs mark a first for the industry. She highlighted an increased awareness among investors regarding inflation's effect on their portfolios and a growing demand for more inflation protection.
The iShares iBonds are structured to mature like bonds while trading on an exchange similar to stocks. They offer exposure to a diverse collection of securities akin to a fund. BlackRock initially ventured into this type of ETF in 2010 with municipal bonds and subsequently diversified into corporate debt and Treasurys. Investors typically use these ETFs to construct ladders based on their maturities.
The new TIPS ETFs include iShares iBonds Oct 2024 Term TIPS ETF (IBIA), Oct 2025 Term TIPS ETF (IBIB), Oct 2026 Term TIPS ETF (IBIC), Oct 2027 Term TIPS ETF (IBID), Oct 2028 Term TIPS ETF (IBIE), Oct 2029 Term TIPS ETF (IBIF), Oct 2030 Term TIPS ETF (IBIG), Oct 2031 Term TIPS ETF (IBIH), Oct 2032 Term TIPS ETF (IBII), and Oct 2033 Term TIPS ETF (IBIJ).
BlackRock's iBonds ETFs hold a range of bonds with matching maturity dates, providing regular interest payments and a final payout in the stated maturity year. The firm's iBonds ETFs have a total of $23 billion in assets under management, primarily invested by financial advisers on behalf of their clients. Individual investors also directly purchase these funds.
Veraa noted that the majority of assets are still concentrated in the firm's one-to-five-year iBonds, indicating a preference among investors for shorter maturities. The new TIPS-defined maturity bond ETFs will carry an expense ratio of 0.1%.
Meanwhile, the U.S. Federal Reserve continues its efforts to combat inflation, which remains above its target despite a slowdown over the past year. Fed Chair Jerome Powell recently reaffirmed the central bank's dedication to implementing and maintaining a sufficiently restrictive monetary policy to reduce inflation to their 2% goal over time.
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