The good news for BlackRock is that they have "an army of salespeople" who can hawk the products to users of its flagship bond funds, said Todd Rosenbluth, director of ETF and mutual funds at CFRA. Still, "active hasn’t been as damaged on the fixed-income side, so it’s not like iShares will necessarily attract the frustrated active fixed-income investor," he said.
Fractional Assets
Smart beta bond ETFs hold just a fraction of the assets of passive equity funds, with around $14 billion compared with more than $500 billion in stock products, according to data compiled by Bloomberg Intelligence.
The iShares Edge U.S. Fixed Income Balanced Risk ETF, symbol FIBGR, was an early smart beta bond fund that has amassed $120.5 million since its launch -- a dud by BlackRock standards. The firm’s products take in about $100 million every 45 minutes, according to Eric Balchunas, a Bloomberg Intelligence analyst.
The new funds also break with tradition by tracking a self-designed index rather than one created by a third party. For buyers who may potentially be interested in these products, transparency and availability of information will be key, said Joseph Smith, a portfolio manager at CLS Investments LLC in Omaha, Nebraska.
"I think the caution that we have is that they’re self-indexed," said Smith. "Some of our pain points include asking how available and transparent the index information will be versus an ETF that just has a third party provider."
This article was provided by Bloomberg News.