To meet growing demand for smart beta strategies across various asset categories, BlackRock’s iShares has launched four new bond exchange traded funds that screen for quality, value and environmental, social, governance (ESG) principles.
On Thursday, BlackRock rolled out four ETFs, including:
- iShares Edge Investment Grade Enhanced Bond ETF (BATS: IGEB) 0.18% expense ratio
- iShares Edge High Yield Defensive Bond ETF (BATS: HYDB) 0.35% expense ratio
- iShares ESG USD Corporate Bond ETF (NasdaqGM: SUSC) 0.18% expense ratio
- iShares ESG 1-5 Year USD Corporate Bond ETF (NasdaqGM: SUSB) 0.12% expense ratio
The Edge Investment Grade Enhanced Bond ETF tries to reflect the performance of the BlackRock Investment Grade Enhanced Bond Index, which is comprised of investment-grade corporate debt and screens out debt with the highest probability of default and then optimizes to improve risk-adjusted returns by weighting more heavily toward bonds with attractive default-adjusted spreads.
The Edge High Yield Defensive Bond ETF tries to reflect the performance of the BlackRock High Yield Defensive Bond Index, and similar to IGEB, HYDB screens out bonds with the highest probability of default but focuses on high-yield corporate debt.
“Creating new indices and ETF products tracking them allows investors to directly benefit from BlackRock investment insights and sophisticated risk management technology developed over decades of active and index fixed income management,” Martin Small, U.S. Head of iShares at BlackRock, said in a note.
The other two smart beta bond ETFs follow the ESG theme. The ESG USD Corporate Bond ETF tries to reflect the performance of the Bloomberg Barclays MSCI US Corporate ESG Focus Index, which incorporates ESG rating inputs from MSCI ESG Research. The investment-grade corporate debt holdings that have positive ESG characteristics.
The ESG 1-5 Year USD Corporate Bond ETF tracks the Bloomberg Barclays MSCI US Corporate 1-5 Year ESG Focus Index. Similar to SUSC, SUSB includes investment-grade corporate debt that have positive ESG characteristics, except it leans toward the shorter end of the yield curve.
Furthermore, BlackRock has lowered the expense ratio on iShares MBS ETF (NYSEArca: MBB) to 0.09% from 0.27% to establish MBB as the investor vehicle of choice for mortgage debt exposure.
“BlackRock’s founders pioneered the MBS markets and managing mortgage risk is deep in our firm’s DNA. With a looming unwind of the Federal Reserve’s $2 trillion mortgage portfolio, now is the time for investors to consider MBB for a core part of any MBS investment strategy,” Small said. “By lowering the price to make the fund competitive with direct investment in mortgage securities, institutions will have a much more efficient, liquid option for dynamically managing mortgage-backed exposures. Clients have responded positively to past efforts by BlackRock to lower prices on certain products in order to offer them new ways to access specific exposures. ”
For more information on new fund products, visit our new ETFs category.