BlackRock has launched its latest actively managed fixed-income ETF, tapping into an investment strategy that has seen success on the mutual fund side and a fund manager that has also been successful with another actively-managed ETF.
The BlackRock Total Return ETF (BRTR) serves as a diversified core bond strategy, while seeking alpha opportunities throughout the fixed-income market. Its goal is to deliver consistent, attractive returns regardless of what is happening in the markets, BlackRock said.
The firm has enjoyed success in its active ETF space, having launched the BlackRock Flexible Income ETF (BINC) in May. Since launch, that ETF has reached $411 million in assets under management and outperformed its benchmark, the BBG U.S. Universal Index, and the Bloomberg US Aggregate Bond Index by 3.3% and 3.8% respectively, the firm said.
Both funds are managed by Rick Rieder, CIO of global fixed Income at BlackRock,. The Total Return ETF’s benchmark is the Bloomberg US Aggregate Bond Index.
With the rising popularity of model portfolios, investors are looking for a variety of ETFs they can incorporate to provide balance in the portfolio, according to Steve Laipply, global co-head of bond ETFs at BlackRock.
“For the ETF-only portfolios, they want to start blending active and indexed together, so we’ve been wanting to provide a full offering, the full toolkit to enable them to do that,” he said.
The firm said it sees the Total Return and Flexible Income ETFs complementing each other within a portfolio. The former is a core plus exposure and works as “table steaks” for investors, while the latter works as an income fund and complements the core bond exposure, according to Laipply.
The Total Return ETF emulates the strategy of the BlackRock Total Return Fund (MAHQX), which has outperformed its benchmark over the recent one, three, five and 10-year periods since launching in 2007. It has amassed about $18 billion in assets and earned a Gold Rating from Morningstar, according to the firm.
“Increasingly over time, people want to build out more robust portfolios and more robust models, so it’s a natural extension for us to be able to provide an ETF version of this strategy,” Laipply said.
The ETF seeks to outperform its benchmark but also has the flexibility to move beyond the core strategies within that benchmark, according to Laipply.
“What Total Return can do is move outside of those core strategies when the opportunities present themselves,” he said.
Those non-core strategies include high-yield bonds, CLOs, bank loans and emerging markets.
BlackRock now has 127 fixed-income ETFs with 10 active bond ETFs, according to the firm. In addition, it has about $625 billion in U.S. assets under management in fixed-income ETFs, with more than $13 billion in active ETFs.
The Total Return ETF has an expense ratio of 38 basis points and the firm will distribute it through its wealth advisor sales force, Laipply said.