BlackRock Launches First Line of TIPS Defined Maturity ETFs

BlackRock Inc., the asset management behemoth with over $2.3 trillion in 417 ETFs, launched the first exchange-traded funds that offer investors exposure to defined maturity Treasury Inflation-Protected Securities, tapping into investor demand for inflation-protected products.  

The set of ETFs went live on the market on Sept. 21 and include 10 funds that invest in U.S. TIPS with expiration dates between 2024 and 2033, according to a press release. The funds will distribute a final payout in its maturity year, along with intermittent interest payments.  

“The TIPS iBonds ETF suite provides advisors a new way to navigate this higher for longer rate environment while simultaneously providing investors a way to manage inflation risk and access yield,” Karen Veraa, head of U.S. iShares Fixed Income Strategy at BlackRock, said in the statement.  

TIPS ETFs a Way to Deal With Inflation 

Retail and institutional investors alike are grappling with high interest rates and stubborn inflation and are looking for investments that can weather the current market. 

“TIPs are attractive for investors who are worried about inflation, while defined maturity bond ETFs are attractive for investors who want to minimize interest rate risk,” etf.com analyst Sumit Roy said. “In an environment in which inflation is still a concern and rates are still rising, it makes sense that some investors might want to invest in ETFs that can offset those risks." 

Buying fixed income in the ETF package can help investors build a more diverse bond portfolio. Having the ETFs in a suite product can help make “bond laddering simpler with only a few ETFs rather than researching and purchasing numerous individual bonds,” according to the press release. 

The funds, which all have an expense ratio of 0.10%, are the new additions to BlackRock’s $23 billion iBonds franchise, which the firm launched in 2010. The average expense ratio for fixed income ETFs is 0.34%, according to etf.com data.  

BlackRock’s largest fund is the iShares Core S&P 500 ETF (IVV) with nearly $354 billion under management. Its largest fixed-income offering is the iShares Core U.S. Aggregate Bond ETF (AGG) with $92 billion under management.