BlackRock’s exchange traded fund business iShares plans to roll out a family of fixed-income ETFs that target specific maturities, similar to individual bonds, Reuters reports.
Guggenheim Investments already manages a lineup of so-called defined-maturity ETFs called BulletShares.
The new iShares ETFs would “simplify the task of institutional money managers like bank treasurers, who currently must juggle hundreds or even thousands of distinct bond issues in their portfolios, BlackRock President Robert Kapito said,” according to the Reuters story.
The new funds would zero in on corporate bonds with maturities in 2016, 2018, 2020 and 2023. The ETFs would pay out the principal at maturity.
“Defined-maturity ETFs have been embraced by advisors who are building laddered portfolios, require income to support their client’s life-style, or are seeking to meet certain client’s life goal needs,” said Guggenheim Investments portfolio strategist Tony Davidow in an interview last year.
“Defined-maturity ETFs are ideal tools for laddering bond portfolios,” Davidow said. “Because of the finite maturities, advisors can use multiple defined maturity ETFs to spread their risk, and stagger their maturities. One of the advantages to defined-maturity ETFs in a changing rate environment is the ability for an advisor to manage their client’s duration risk.”
Guggenheim sponsors 14 corporate bond and high-yield corporate bond BulletShares ETFs, including Guggenheim BulletShares 2015 Corporate Bond ETF (NYSEArca: BSCF). The maturity dates span from 2013 to 2020. [Corporate Bond ETFs Target Specific Maturities]