iShares, the world’s biggest exchange-traded fund company by assets, looks to be planning an expansion of its presence in the relatively unexplored pocket of target-date maturity bond ETFs, with a series of regulatory filings over the past several weeks detailing corporate bond funds that will expire once all the bonds in a given portfolio mature.
The San Francisco-based firm is no stranger to target-date maturity bond funds, as it already markets a lineup of bond ETFs targeting municipal debt that will mature from this year through 2017. Those funds, which trade under the tickers MUAB, MUAC, MUAD, MUAE and MUAF, have total assets of $223 million, or an average of about $45.5 per fund, according to data compiled by IndexUniverse.
The more salient comparison to what iShares is cooking up is to two target-date corporate bond ETF lineups marketed by Lisle, Ill.-based Guggenheim Investments with the brand name BulletShares. One eight-fund lineup, targeting investment-grade debt, has total assets just shy of $1 billion, while the six-fund junk series has $911 million.
While the iShares muni-focused series hasn’t gathered assets in any huge way in the past few years, the Guggenheim BulletShares ETFs have been slowly gaining traction. Some industry observers, including IndexUniverse ETF Analyst Dennis Hudachek, reckon that the BulletShares and products like it might become more attractive in an environment of rising rates.
Such funds are basically like an individual bond—they mature or expire at par value, and investors could ladder them as they do individual bonds, giving them a clear mechanism to manage interest rate risk as rates head higher in the coming years. Principal that matures could be reinvested in a diversified bond portfolio that will presumably have a higher “coupon,” or at least the equivalent to a coupon.
What could be crucial is that iShares has priced the funds at 0.10 percent, or $10 per $10,000 invested, compared with 0.24 percent for the Guggenheim investment-grade corporate debt funds. Guggenheim’s high-yield corporate-debt target-date funds are priced at 0.42 percent—hardly a surprise, as the corporate junk bond market isn’t as liquid as the high-yield market.
The following filings we’ve picked out of the Securities and Exchange Commission online filing database don’t paint the picture of a comprehensive offering across the maturity curve, but it’s also not clear we’ve picked out all the funds that BlackRock’s iShares has put into registration so far.
The funds, and links to their respective registration statements are as follows:
- iShares 2016 Investment Grade Corporate Bond ETF, proposed ticker “YTMA”; proposed expense ratio 0.10 percent
- iShares 2016 Investment Grade Corporate Multi-sector Bond ETF, no ticker or expense ratio named
- iShares 2018 Investment Grade Corporate Bond ETF, proposed ticker “YTMB”; proposed expense ratio 0.10 percent
- iShares 2018 Investment Grade Corporate Multi-sector Bond ETF, no ticker or expense ratio named
- iShares 2020 Investment Grade Corporate Multi-sector Bond ETF, no ticker or expense ratio named
- iShares 2023 Investment Grade Corporate Bond ETF, proposed ticker “YTMD”; proposed expense ratio 0.10 percent
- iShares 2023 Investment Grade Corporate Multi-sector Bond ETF, no ticker or expense ratio named
It’s not immediately clear what the differences are—if any—between the straight corporate bond portfolios and the so-called multi-sector funds.
Also, officials from iShares were looking into the full extent of the filings the company has made.
The prospectuses of each of the straight corporate funds and the multisector funds said each of the portfolios is “a term fund” that will expire on March 31 of the year in the given fund’s name.
Each fund’s underlying index will be U.S. dollar-denominated, investment-grade securities publicly issued by U.S. and non-U.S. corporate issuers that have $250 million or more of outstanding face value at the time of inclusion.
Each fund’s investment in non-U.S. corporate issuers initially will consist primarily of corporate bonds issued by companies domiciled in developed countries, the filings said.
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