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BlackRock launches floating rate bond ETF

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BlackRock has expanded its fixed income ETF range with the launch of a floating rate bond fund, designed to protect investor portfolios against a rise in interest rates.

The iShares $ Floating Rate Bond UCITS ETF (FLOT) provides exposure to US dollar denominated floating rate bonds. BlackRock writes that floating rate bonds offer coupons that adjust to reflect changes in interest rates, compared with traditional bonds which pay fixed coupons. Bonds held in the underlying index of the fund are rated investment grade or higher, and have a maturity of five years or less.

Brett Pybus, Head of iShares EMEA Fixed Income Strategy at BlackRock, says: “Concerns about rising rates have prompted many investors to consider moving out of longer-duration bonds, this fund provides investors with a way to reduce duration and protect portfolios against periods of rising interest rates.  The fund provides investors with exposure to short dated, high quality floating rate credit denominated in US dollars and offers an attractive yield compared with money market funds.

“Our focus continues to be on developing a broad and granular range of ETFs that help investors build precise and cost-efficient portfolios, and this fund is testament to that.”
The fund is physically-replicating, meaning it holds the underlying securities of the index.  The fund has a total expense ratio of 0.10 per cent.

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