iShares Rolls Out Active Short-Duration Bond ETF
BlackRock's (NYSE: BLK) iShares unit, the world's largest ETF issuer, introduced the iShares Short Maturity Bond ETF (BATS: NEAR), a short maturity, actively managed bond ETF, on Thursday.
While 10-year Treasury yields have declined in the past month, they have still surged 42.1 percent year-to-date, recently prompting investors to pull billions of dollar from ETFs with exposure to long duration bonds.
Last week, the Federal Reserve surprised investors by opting to not taper its $85 billion in monthly bond purchases. However, uncertainty remains regarding exactly when tapering will happen with some market observers thinking it could happen next month and others convinced tapering will certainly take place before the end of 2013.
Previous tapering speculation pushed Treasury yields higher, leading to capital erosion for those invested in longer duration bonds and outflows from various bond ETFs.
The iShares Short Maturity Bond ETF seeks to reduce investors' exposure to rising interest rates relative to longer duration bond portfolios by maintaining an effective duration of less than one year. The ETF also aims to help investors navigate the current low yield environment by providing exposure to a diversified portfolio of short term, primarily investment grade bonds," iShares said in a statement.
NEAR will hold wide variety of bonds with an average duration of one year or less. Duration is the measure of a bond's sensitivity to interest rate changes.
"Investors have traditionally looked to bonds to add diversity, stability and income into their portfolios," said Matthew Tucker, Head of iShares Fixed Income Investment Strategy, in the statement. "But as large areas of the bond market offer little or no yield, and with a period of rising rates likely ahead of us, investors have been rethinking their fixed income portfolio."
iShares currently manages nearly $39 billion in short duration bond ETF assets. NEAR will have annual expense ratio of just 0.25 percent, low by the standards of actively managed ETFs, according to iShares data.
The firm has previously listed ETFs on the BATS Exchange, including the iShares MSCI Norway Capped ETF (BATS: ENOR) and the iShares MSCI Finland Capped ETF (BATS: EFNL).
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