BlackRock is launching the iShares US Mortgage Backed Securities UCITS ETF (IMBS), Europe’s first exchange traded fund (ETF) investing in high quality US mortgage-backed securities.
The new ETF provides access to high quality, AAA-rated mortgage-backed securities issued by three agencies backed by the US government. The underlying index, the Barclays US MBS Index, is based on a universe of individual fixed rate pools, ensuring diversification across factors such as sensitivity to interest rates and prepayment risk. The fund is physically replicating, meaning it buys the securities of the index, and has a total expense ratio of 0.28 per cent.
The fund is the 88th UCITS fixed income ETF launched by iShares.
A mortgage-backed security, or MBS, is made up of pools of mortgages that are combined or ‘securitised’ into a liquid and tradeable bond. The US agency-backed MBS market is the most liquid part of the securitised bond market, and the second most liquid US bond market after Treasuries. These securities account for around 11 percent of the USD49 trillion global fixed income market.
Brett Olson, Head of iShares EMEA Fixed income, says: “This is a part of the bond market that European UCITS investors previously haven’t had access to through an ETF. This is the latest addition to our industry-leading range of UCITS bond ETFs, and represents yet another tool that investors can use to diversify their bond exposures in a liquid and transparent way.”
“Mortgage-backed securities have the potential to offer higher yields than bonds of similarly high credit quality. This fund could be an option for investors looking to gain exposure to the US housing market in addition to corporate balance sheets.”