Bond ETFs Helped to Boost BlackRock’s Profit by 21%

There wasn’t a dearth of investment capital when it came to fixed income during the coronavirus pandemic. Global investment firm Blackrock’s profit numbers jumped by 21% thanks to the fixed income, including bond-focused exchange-traded funds (ETFs).

A Wall Street Journal article noted that “BlackRock’s bond exchange-traded funds did a brisk business in the quarter as traders and financial institutions used ETFs to zip in and out of markets, make wagers, or hedge their portfolios during unprecedented volatility. ETFs are collections of instruments that trade like stocks on exchanges.”

“BlackRock bond ETFs took in a record quarterly $57 billion in net flows,” the report noted. “The firm also posted net inflows overall into all ETFs in the second quarter, with more complex, higher-fee ETF strategies generally taking in the bulk of flows.”

“The quarter illuminates the importance of the ETF market,” Chief Executive Laurence Fink said in an interview.

Investors looking for core bond exposure can look to the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG), which has been the go-to fund for investors.

Fund facts:

  • AGG seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index.
  • The index measures the performance of the total U.S. investment-grade bond market.
  • The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.

Reasons to use AGG:

  • Broad exposure to U.S. investment-grade bonds
  • A low-cost easy way to diversify a portfolio using fixed income
  •  Use at the core of your portfolio to seek stability and pursue income

AGG Chart

AGG data by YCharts

With Treasury yields near lows thanks to the central bank cutting interest rates this year, AGG might not be the best option for yield-started investors. However, for those looking for overall bond exposure–say, for a 60-40 capital allocation strategy, using an ETF like AGG would help especially given the amount of investment-grade debt issues it holds.

Another ETF to consider is the Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB). GIGB seeks to provide investment results that closely correspond to the performance of the FTSE Goldman Sachs Investment Grade Corporate Bond Index.

The fund seeks to achieve its investment objective by investing at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index. The index is a rules-based index that is designed to measure the performance of investment grade, corporate bonds denominated in U.S. dollars that meet certain liquidity and fundamental screening criteria.

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