BlackRock is to expand its iShares suite of exchange-traded products (ETPs) to include factor-based commodity funds.
Initially, iShares, a global leader in ETPs, intends to add two broad-based commodity ETPs with carry and multi-factor strategies. Consistent with BlackRock’s advocacy and leadership in developing a clear classification system for ETPs, BlackRock considers these products to be ‘Exchange Traded Commodities’ (ETCs).
Led by Dr Andrew Ang, BlackRock’s factor-based investing platform manages more than USD200 billion globally across active and index strategies and fund vehicles, including absolute return strategies, mutual funds, target-date funds and single and multi-factor ETFs.
The proposed factor-based funds are expected to be the first in a series of enhancements to iShares’ line-up of commodity ETPs. iShares plans to continue to develop new products to meet investors’ needs and demands.
According to the Investment Company Institute, ETP net assets grew six-fold over the last decade to USD3.5 trillion (as of 30 September 2018).
“Commodities and commodity ETPs have traditionally played an important role in asset allocation decisions due to their diversification benefits, as well as being used as a potential means of inflationary hedging,” says Mark Alberici, Head of iShares Commodities Product Development. “Given recent market volatility, diversification across commodities is becoming even more important in portfolio construction.”
Additionally, iShares intends to retain Bank of America Merrill Lynch and Morgan Stanley as index providers for commodities strategies, in conjunction with a third-party calculation agent. With this arrangement, BlackRock is seeking to enhance its commodity offerings by providing a more comprehensive suite of products.
“We are thrilled to engage with both Bank of America Merrill Lynch and Morgan Stanley as we provide clients with more comprehensive solutions. We envisage the potential for a broader panel and syndicate of service providers over time, where new commodity strategies can be brought to the market via iShares ETPs,” says Mark Alberici.
“We are excited to be selected by iShares in launching two new broad-based Commodity Carry and Multi-Factor ETPs and to support iShares in their development of the global ETP ecosystem. iShares’ engagement of Bank of America Merrill Lynch on these products reflects our shared expertise in Commodity Factor investing and our ability to provide comprehensive solutions to our strategic clients,” says Karen Fang, Head of BofAML Americas FICC Sales & Solutions.
“We’re delighted to help BlackRock expand its suite of commodities-based exchange traded products,’’ says Nikki Tippins, Managing Director at Morgan Stanley. “Our firm’s in-depth knowledge of the commodities markets combined with the expertise and commitment of iShares will give investors differentiated access to this important asset class in their portfolios.”
In its recent comment letter to the Securities and Exchange Commission, BlackRock reiterated its recommendation that a more comprehensive approach to ETP classification be considered to improve investors’ abilities to understand and analyse the risks of individual ETPs.
