Feb 13 BlackRock, the world's largest manager of exchange-traded funds, will soon release a new series of fixed-income funds that mature after a set number of years, like ordinary bonds.
The new ETFs are designed to simplify the task of institutional money managers like bank treasurers, who currently must juggle hundreds or even thousands of distinct bond issues in their portfolios, BlackRock President Robert Kapito said on Wednesday.
A single ETF owns a basket of many bonds but trades far more easily on a stock exchange.
"I think this will be the biggest product that's ever hit the fixed income market," Kapito said, speaking at a Credit Suisse conference in Miami.
The new funds will focus on corporate bonds with maturities in 2016, 2018, 2020 and 2023, according to BlackRock filings with the U.S. Securities and Exchange Commission. Each fund will mature, or pay out all of its bond principal, on March 31 of the given year. Management fees will be as little as 0.1 percent of assets.
The funds are similar to those of smaller ETF manager Guggenheim Investments, which offers a series of eight corporate bond ETFs that mature from 2013 through 2020 and six high-yield bond ETFs with maturities extending until 2018. Those funds had total assets of almost $2 billion at the end of last year.
Most fixed-income ETFs own a basket of bonds but continually buy new ones as current holdings reach maturity. Thus the funds exist in perpetuity.
BlackRock's iShares line of ETFs oversaw $753 billion at the end of 2012, more than any other firm.