Exchange traded funds help investors efficiently gain exposure to the often hard to access, illiquid fixed-income markets. Instead of juggling thousands of individual bond securities,BlackRock has been advising clients to tactically allocate into a handful of bond ETFs.
At the recent Barclay’s Financial Services conference, BlackRock CEO Larry Fink shared an anecdote about a vexed client who “had 4,000 items of fixed income securities in their portfolio … It’s very hard now to navigate the fixed income market — it is so illiquid right now,” reports Herb Greenberg for CNBC.
As an alternative, BlackRock proposed that the client switch out the 4,000 securities for six different fixed-income ETFs.
“So instead of having 4,000 items this client now has six ETFs and now they are tactically trading different ETFs,” Fink said. “One of them can be an emerging markets ETF in fixed income, one can be credit, one maybe government — and this client is moving around tactically and the client is saving money related to line items [and]doesn’t have 4,000 to worry about.”