NEW YORK, Sept 26 BlackRock Inc, the largest provider of exchange-traded funds through its iShares business, is set to launch a new actively managed ETF focused on short-maturity bonds that will begin trading Thursday.
The introduction of the iShares Short Maturity Bond ETF, which will trade under the ticker "NEAR" on the BATS Exchange, comes at a time when BlackRock and other ETF providers say concerns about rising interest rates have driven investor interest toward more short-term fixed-income securities.
Rising rates cause bond prices to fall, and the longer the maturity of the bond, the sharper the fall.
"I think we will continue to see investors repositioning toward short duration in anticipating of rising rates," iShares' head of fixed-income strategy, Matt Tucker, said in an interview. Financial markets expect the Federal Reserve will reduce its bond-buying program, which is designed to hold down long-term interest rates, in the months to come.
Duration is a measure of the sensitivity of the price of a bond to a change in interest rates. A bond with a shorter duration is typically less volatile when rates rise than long-term bond funds.
Year to date, investors have put roughly $31.6 billion into short-term exchange-traded bond funds, according to BlackRock.
The new iShares ETF includes a range of U.S. dollar-denominated short-term fixed-income securities with an average duration of one year or less. At least 80 percent of the fund will be comprised of investment-grade assets, which include U.S. debt and corporate debt.
"We see this one-year duration being a nice in-between" to other existing funds, Tucker said.
"It's a part of the market where there are actually not a lot of offerings for investors," he said. "It represents an interesting sweet spot for some investors who want to take on some risk but maybe not as much as even a two- or three-year duration fund might offer."
BlackRock currently has $55 billion in its active short-duration business, which includes a range of private and public funds.
"This is a way for us to extend that lineup and basically offer an ETF that gives exposure to the short-duration part of the market," Tucker said.
BlackRock, the world's largest money manager, bought iShares from Barclays in 2009. BlackRock had nearly $3.9 trillion in assets under management at the end of June.