BlackRock has rolled out fixed-income ETF solutions to simplify access to the increasingly complex U.S. bond market, as investors look beyond traditional core allocations for diversification and resilience.
The asset manager on Tuesday launched the iShares Total USD Fixed Income Market ETF (ARCA: BTOT), which it claims is the first index-based ETF to provide broad exposure to the total taxable universe of fixed income in the U.S. This launch is occurring at a time when bond investors are rebalancing their portfolio construction strategies in light of dramatic interest rate fluctuations over the years.
BTOT follows the Bloomberg US Total Fixed Income Market Index, which aims to be broader than the Bloomberg US Aggregate Index. As stated in a press release, this index goes wider by approximately 28% over Agg and 9% over the Bloomberg US Universal Index, including sectors that are generally excluded from core bond ETF offerings.
Such additional sectors include bank loans, Treasury Inflation-Protected Securities (TIPS), and floating-rate notes, which have become attractive alternatives amid uncertainty in both commodity and interest rates. With this strategy, BTOT aims to reduce the need for investors to combine multiple fixed-income funds to achieve broader diversification.
Steve Laipply, global co-head of fixed income ETFs at iShares, noted: “Bond markets have evolved dramatically over the years, and investors need tools that keep pace with this change.”
Laipply added that BTOT is designed to enable investors to diversify their portfolios with simpler, more efficient access.
The ETF’s pricing is competitive, with a gross expense ratio of 0.10% and a net expense ratio of 0.09%, making it comparable to other large-cap index bond ETFs.
BlackRock indicated that BTOT can be used as a core portfolio building block and complements, rather than replaces, its existing fixed-income offerings. They recommended using AGG for core investment-grade exposure and IUSB for core-plus investment strategies. They indicated the addition of new exposures beyond those offered by these two investment solutions.
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