iShares Plans Active Bond ETF

February 06, 2013

iShares joins a crowded pipeline of actively managed bond ETFs with a short-term fund.

iShares, the largest purveyor of ETFs globally, filed paperwork with regulators to market an actively managed bond fund that would invest in dollar-denominated corporate and government debt, the latest provider to turn to active management in the fixed-income space.

The iShares Liquidity Income Fund—an ETF designed to generate current income and preserve capital—would join the likes of the Guggenheim Enhanced Core Bond ETF (NYSEArca: GIY) as well as other fixed-income active portfolios from WisdomTree and FlexShares currently sitting in the regulatory pipeline.

The portfolio will comprise primarily investment-grade fixed- and floating-rate debt that’s dollar-denominated, the filing said. It would also have a dollar-weighted average life of one year or less—that’s the weighted average of the times by which the principal has to be repaid.

iShares has been slowly filing for active ETFs to add to its roster of 200-plus passive ETFs that currently dominate the U.S. ETF market in terms of assets. Many have said that the fixed-income space is particularly prospective for active management thanks to its many inefficiencies that aren’t easily captured in a passive strategy.

Last year, the firm put into registration active ETFs canvassing equities, currencies and a sovereign bond fund.

Derivatives In The Mix

Other than corporate and government bonds, the fund may also invest in securities from non-U.S. issuers, asset-backed and mortgage-backed securities, municipal bonds and money market instruments, among other things.

The planned ETF is not a money market fund and does not seek to maintain a stable net asset value of $1 per share, the company said in the filing.

“The fund may, to a limited extent, engage in derivatives transactions that include futures contracts, options and swaps,” it added.

No ticker or fees were detailed in the filing.



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