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BlackRock launches iBonds ETFs in Europe


BlackRock has launched iBonds ETFs in Europe, described as the first suite of fixed maturity UCITS ETFs. The firm writes that iBonds are ETFs that behave similarly to bonds and mature on a defined date. 

The funds hold a diversified set of bonds with similar maturity dates. After a fixed period, the ETFs will mature and return a final pay out to investors. The firm writes that the funds provide cost effective access to the corporate bond market, with the diversification, transparency, and liquidity benefits of ETFs.

The firm writes that these four iBonds ETFs provide exposure to investment grade (IG) corporate bonds across various countries and sectors in each ETF. The ETFs offer two defined maturity dates respectively, in December 2026 and 2028, both across USD and EUR, giving investors flexibility across currencies, maturities, and countries.

BlackRock writes that iBonds ETFs can be used by investors to complement savings accounts, in an easily understood structure, which aims to achieve a return through a combination of capital growth and the income on the fund’s assets which is derived from the underlying bonds’ coupon payments. The ETF suite can also be used to add scale to bond portfolios offered by investment advisors and enhance operational simplicity. Each iBonds ETF holds a diversified basket of bonds, and can replace a large number of holdings, minimising the need to source and manage individual bonds.

“iBonds ETFs are designed to mature like a bond, trade like a stock and diversify like a fund, all in a cost-efficient and transparent ETF wrapper. The fixed maturity nature of iBonds ETFs aims to offer investors clarity into their yield expectations and investment horizon. Bond ETFs are increasingly being used as an alternative to picking individual bonds which can be costly for investors,” says Brett Pybus, Global Co-Head of iShares Fixed Income ETFs at BlackRock.   

BlackRock launched the first iBonds ETF in the US in 2010. The firm writes that, recently, it has seen significant demand for these funds, with inflows of USD8.1 billion over 2022, and USD5.2 billion over 2023, per end of July. BlackRock writes that it is now bringing this innovation to Europe via a UCITS ETF wrapper, helping clients achieving their investment goals. Fixed Income UCITS ETFs have had a record start to the year in Europe in terms of asset gathering, with USD28.2 billion of inflows per end of July.

Nick Gendron, Global Head of Fixed Income Indices at Bloomberg, says: “The need for fixed maturity indices has been proven through many different market cycles. We’re proud to have been selected by BlackRock to provide benchmarks for these four new corporate bond ETFs in Europe that initially focus on both three and five-year maturities and follow on the successful offerings that have been present in the US for over 10 years.”

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