iShares Launches Target-Date Corporate Bond ETFs to Hedge Rising Rates
April 19th, 2013 at 2:25pm by Tom Lydon
As a response to the historical low yields and the threat of rising interest rates, BlackRock’s iShares exchange traded fund arm has launched four defined-maturity-date corporate bond funds to help investors build a laddered fixed-income portfolio.
According to a press release, the following four ETFs began trading Friday, April 19:
- iSharesBond 2016 Investment Grade Corporate Bond ETF (NYSEArca: IBCB)
- iSharesBond 2018 Investment Grade Corporate Bond ETF (NYSEArca: IBCC)
- iSharesBond 2020 Investment Grade Corporate Bond ETF (NYSEArca: IBCD)
- iSharesBond 2023 Investment Grade Corporate Bond ETF (NYSEArca: IBCE)
The four funds will try to provide exposure to a diversified pool of investment grade corporate debt with a defined maturity date on March 31 for the given year in each of the fund’s name. Each ETF comes with a 0.10% expense ratio. [Target-Date Funds]
The target-date strategies act like individual bond securities since they would mature or expire at par value and investors would be able to utilize them in a laddered bond portfolio. Consequently, investors can spread risk and stagger their exposure to varying maturities. Specifically, BlackRock has created this line of ETFs to cater toward institutional cients. [iShares: Rising Rates and Target-Date Funds]
“As investment grade corporate bond markets struggle with liquidity and transparency of pricing, institutional investors continue to use fixed income ETFs to efficiently manage their bond portfolios,” according to the press release.
“For some institutional investors, the idea that an ETF never matures or liquidates has been a hurdle,” Matt Tucker, Head of iShares Fixed Income Investment Strategy, said in a Bloomberg article. “These funds have the pricing and liquidity of an ETF plus the finite life you get with an individual bond portfolio.”
The new iShares defined maturity ETFs will be competing with Guggenheim Investments’ line of BulletShares ETFs, which include both investment grade and speculative corporate debt exposure. [Corporate Bond ETFs Target Specific Maturities]
For more information on new product launches, visit our new ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.