iShares launches target sector and corporate credit quality bond ETFs

Feb 16th, 2012 | By | Category: Fixed Income

The blitz of new ETFs hitting the market shows no sign of letting up.  The latest launch – seven US-listed funds from iShares – includes the first fixed income ETFs to target specific sectors and corporate credit quality.

iShares launches target sector and corporate credit quality bond ETFs

iShares has launched a range of target sector and corporate credit quality bond ETFs, including one focused on companies in the utilities sector.

Indeed, 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 US Corporate Aaa – A Capped Index

iShares Barclays US Treasury Bond Fund (NYSEArca: GOVT) – Offers exposure to a broad range of US Treasuries maturities (1-30 years) in one trade. Designed to track the Barclays Capital US Treasury Bond Index, the new fund allows investors to shift towards US 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 US 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 US corporate financial sector bonds. Today 33% of the US corporate bond market comprises financials sector bonds. The new fund is designed to track the Barclays Capital US 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 US corporate bond market. The new fund is designed to track the Barclays Capital US 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 US utility corporate bond sector. It is designed to track the Barclays Capital US 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.”

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