BlackRock Launches Active ETF That Mimics Popular Mutual Fund

ETF giant BlackRock Inc. has filed to launch a new active fixed income exchange-traded fund, tapping into increasing investor demand for actively managed funds.  

The firm filed with the Securities and Exchange Commission on Sept. 8 to roll out the BlackRock Total Return ETF. The actively managed fund will aim to beat the Bloomberg U.S. Aggregate Bond Index, according to the filing. It would be the second ETF to be managed by Rick Rieder, BlackRock’s chief investment officer of global fixed income. The first was the BlackRock Flexible Income ETF (BINC), which launched in May. 

BlackRock, the world’s largest asset manager, has $2.42 trillion under management in 421 ETFs.

Diversified Basket of Fixed Income Products

The Total Return ETF aims to invest over 90% of its holdings in “a diversified portfolio of fixed-income securities such as corporate bonds and notes, mortgage-backed securities, asset-backed securities, convertible securities, preferred securities and government obligations,” according to the fund’s prospectus.

The ETF follows the same index as its mutual fund counterpart, the BlackRock Total Return Fund (MAHQX). The mutual fund offers investors exposure to a diversified core bond portfolio and is up about 1% year to date. The mutual fund has a net expense ratio of 0.45%. The average expense ratio for fixed income ETFs is 0.34%.  

ETFs have been gaining steam over mutual funds because of their competitive fees and ease of investing. Some firms have opted to convert mutual funds into ETFs, while others are attempting to offer ETF share classes of successful mutual funds.  

Actively Managed ETFs on the Rise

Active ETFs in particular have been on the rise as managers look to beat funds that track broad indexes. The 1,162 active ETFs hold about $446.6 billion in assets, and the average expense ratio of these funds is 0.69%, according to etf.com data. 

The amount of assets under management in active ETFs has grown 16.5% year to date, according to Cerulli Associates. Matt Apkarian, associate director of product development at Cerulli, told etf.com that the shift from mutual funds to ETFs has accelerated “especially with the proliferation of active ETFs.” 

The fixed income-focused product from BlackRock comes as many investors anticipate that the Federal Reserve will keep interest rates high. With 612 ETFs on the market, fixed income ETFs hold $1.41 trillion in assets.