BlackRock’s foray into strategic beta bond ETFs comes at a time of rapid growth for bond funds. Through Feb. 12, investors poured $19.6 billion into bond ETFs this year, according to iShares, helping place five bond funds on the top 10 list of ETFs for year-to-date inflows. Last year, the Vanguard Total Bond Market ETF (NYSEArca: BND) and the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG) were among the top 10 asset-gathering ETFs. [Bond ETFs Keep Gaining Cash]
With AGG and ETFs such as the iShares iBoxx $ Investment Grade Corporate Bond ETF (NYSEArca: LQD) and the iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF), BlackRock’s iShares is one of the largest issuers of fixed income ETFs.
Some smart beta bond ETFs already exist, including the $2.38 billion PowerShares Emerging Markets Sovereign Debt Portfolio (NYSEArca: PCY) and the $593.3 million PowerShares Fundamental High Yield Corporate Bond ETF (NYSEArca: PHB).
PCY, which is almost seven years old, tracks the DB Emerging Market USD Liquid Balanced Index. Constituent countries “are selected annually pursuant to a proprietary index methodology,” according to PowerShares.
Tom Lydon’s clients own shares of LQD.