BlackRock is launching a series of exchange-traded funds that invest in Treasury inflation-protected securities with maturities ranging from 2024 to 2033, as the Federal Reserve keeps up its fight to bring down the rise in cost of living in the U.S.
The total of 10 TIPS defined maturity bond ETFs, the first of their kind in the industry, will list on Thursday, said Karen Veraa, head of U.S. iShares fixed-income strategy at BlackRock, in a phone interview.
“Post-COVID, investors are much more aware of the effects of inflation and how it can reduce their purchasing power over time,” she said. “We’ve seen a lot of requests for ways to build more inflation protection in portfolios.”
BlackRock’s iShares iBonds ETFs are designed to mature like a bond, while trading on an exchange like a stock and sharing the characteristics of a fund in providing exposure to a group of securities. The firm’s offering of such ETFs started off in 2010 with municipal bonds before expanding into corporate debt and Treasurys, with investors often using them to build ladders based on their maturities, according to Veraa.
“Now we’re doing TIPS,” she said, of Treasury inflation-protected securities.
| BlackRock’s new ETFs |
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iShares iBonds Oct 2024 Term TIPS ETF IBIA |
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iShares iBonds Oct 2025 Term TIPS ETF IBIB |
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iShares iBonds Oct 2026 Term TIPS ETF IBIC |
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iShares iBonds Oct 2027 Term TIPS ETF IBID |
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iShares iBonds Oct 2028 Term TIPS ETF IBIE |
| iShares iBonds Oct 2029 Term TIPS ETF (IBIF) |
| iShares iBonds Oct 2030 Term TIPS ETF (IBIG) |
| iShares iBonds Oct 2031 Term TIPS ETF (IBIH) |
| iShares iBonds Oct 2032 Term TIPS ETF (IBII) |
| iShares iBonds Oct 2033 Term TIPS ETF (IBIJ) |
The firm’s iBonds ETFs have a total $23 billion of assets under management, the bulk of which is invested by financial advisers on behalf of their clients, according to Veraa. Individual investors also purchase them on their own, she said.
“iBonds ETFs hold diverse bonds with matching maturity dates,” with each fund providing regular interest payments and distributing “a final payout in its stated maturity year,” according to BlackRock.
Looking across the spectrum of its offering, Veraa said that “generally a lot of people are still sticking to shorter maturities,” with most of the assets in the firm’s one-to-five year iBonds.
As for the cost of the new TIPS defined maturity bond ETFs, the funds have a 0.1% expense ratio, according to BlackRock.
Meanwhile, the Federal Reserve continues to battle inflation in the U.S. that remains above its target despite the rate slowing over the past year.
The central bank is “committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to our 2 percent goal over time,” Fed Chair Jerome Powell said Wednesday, in prepared remarks after ending its two-day policy meeting.
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