BlackRock Simplifies Bond ETF Laddering

When it comes to fixed income allocations, there are financial advisors who subscribe to the practice of bond laddering to create predictable income streams for clients, and there are advisors who believe the same thing can be accomplished by just parking in a diversified bond ETF.

As they say, differences of opinion and perspective is what makes a market.

BlackRock, the world’s largest ETF issuer, already has all those bases covered and the fact that its iBonds ETF series designed for laddering has attracted more than $32 billion says plenty about the appeal of building bond portfolios that can be managed with minimal effort.

But BlackRock being BlackRock, the New York-based behemoth has identified another opportunity to make bond laddering even simpler to execute and manage.

By year end, BlackRock will be rolling out four ETFs that offer rolling bond laddering exposure to Treasury bonds, Treasury Inflation-Protected Securities, corporate bonds, and high-yield bonds.

Now, instead of having to make a decision when an iBond ETF matures of whether to reallocate the cash or buy another rung of the ladder, the new suite of iShares iBonds 1-5 Year Ladder ETFs will roll continuously.

BlackRock’s Bond Laddering ETFs

Karen Veraa-Perry, Head of U.S. iShares Fixed Income Strategy at BlackRock, said the laddering ETFs are in response to demand from advisors, some of whom are already outsourcing the laddering work that needs to be done in client portfolios.

“We’ve gotten a lot of requests from people using the iBonds asking us to try something that’s rolling,” she said.

Veraa-Perry added that while the iBonds ETFs are currently most popular among financial advisors, “We think this could also appeal to direct investors.”

That’s the part financial advisors should be watching.

Look no further than the single-stock ETF craze that has introduced a simple means of shorting and leveraging individual securities as an example of how ETF innovation can bypass the value of sophisticated investing strategies and techniques traditionally provided by financial advisors.

Bond laddering, which is nowhere near as complicated as applying leverage to a stock position, is about to get even easier.

You can’t stop progress, and Veraa-Perry admits the new bond laddering ETFs will free up advisors to focus on other parts of their business.

But one can’t help but wonder about the potential of ETF issuers steadily taking on all the heavy lifting advisors are doing when it comes to portfolio management.