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iShares launches short-term TIPS exchange-traded fund


BlackRock’s iShares exchange-traded funds business is launching the iShares Barclays 0-5 Year TIPS Bond Fund on the NYSE Arca.

The fund offers targeted exposure to the short end of the domestic Treasury Inflation Protected Security curve through TIPS with less than five years to maturity.

The fund is the only ETF that offers access to the very shortest end of the curve (zero to one year), and is intended to help investors seek protection against realised inflation, achieve additional portfolio diversification, or express a view on yields.

The fund expands the iShares fixed income offering to 33 ETFs.

"iShares has long been the fixed income ETF leader, and we have continued to see strong interest in our fixed income products this year, as investors look for protection from inflation and further diversification in their portfolios," says Matt Tucker, head of fixed income investment strategy for iShares at BlackRock. "The new iShares Barclays 0-5 Year TIPS Bond Fund offers investors these same attributes along with a low sensitivity to interest rates. For example, a STIP investor would receive higher distributions if inflation increases over time, but would see less impact if interest rates rise than would an investor in a longer maturity TIPS fund."

The fund invests only in TIPS securities with zero to five years remaining to maturity. Unlike other TIPS ETFs, it holds securities until maturity. This means that securities acquired by the fund pay out inflation-adjusted income through the fund’s distributions and then return principle to the fund at maturity. These maturity proceeds are then used to purchase more TIPS securities. As a result of this mechanism, a greater percentage of an investor’s return in the fund is made up of inflation adjusted income relative to other TIPS funds.

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