iShares, the world's largest ETF provider, rolled out today
seven fixed-income ETFs, including three first-of-their-kind
corporate bond sector funds, beating Invesco PowerShares and State
Street Global Advisors to the punch.
The iShares Financial Sector Bond Fund (NYSEArca:MONY), the
iShares Industrials Sector Bond Fund (NYSEArca:ENGN) and the
iShares Utilities Sector Bond Fund (NYSEArca:AMPS) each cost 0.30
percent a year in fees, and are the market's first funds to parse
the corporate debt sectors.
Today's rollout also includes the iShares Aaa-A Rated Corporate
Bond Fund (NYSEArca:QLTA), the first-ever ETF to tease out the most
highly rated corporate bonds. The multifund launch also features
funds focused on the commercial mortgage-backed securities market,
U.S. Treasurys and debt issued by Ginnie Mae.
Regarding the corporate bond sector funds, both PowerShares and
SSgA's SPDR Trust have nearly identical funds in registration, the
main difference being their benchmarks. The PowerShares funds are
to be anchored by Merrill Lynch indexes, while the SPDR funds are
tied to Barclays Capital, the same index provider behind the
iShares ETFs launched today.
While it's unclear how iShares was able to get its funds through
the pipeline so quickly-PowerShares first filed its paperwork with
U.S. regulators in December 2009, while the SPDR funds got into the
registration pipeline in March 2010-it's clear that providers are
racing to open up new niches of fixed income, an asset class known
before the advent of the ETF for its lack of liquidity.
Indeed, bond ETFs have been traditionally broader in scope and
only now have begun to become more granular, as fund providers work
through the challenges of offering a liquid fixed-income portfolio
that closely tracks its benchmark, as IndexUniverse Analyst Gene
Koyfman recently pointed out in a blog.
Several ETF providers, including PowerShares and the SPDR Trust,
already offer broad corporate investment-grade debt portfolios such
as the PowerShares Fundamental Investment Grade Corporate Bond
Portfolio (NYSEArca:PICB) or the SPDR Barclays Capital Short Term
Corporate Bond (NYSEArca:SCPB) and its long-term counterpart,
As noted, iShares also rolled out the iShares Aaa-A Rated
Corporate Bond Fund, a broader corporate debt portfolio that zeroes
in on U.S. corporate bonds with the highest credit ratings.
That fund includes only bonds with at least one year to maturity
and at least $500 million of outstanding face value, with as much
as 15 percent of the portfolio being tied to non-U.S. issues. It
has an annual expense ratio of 0.15 percent.
Other Corporate, Treasury Debt Fare
The San Francisco-based ETF giant also rolled out the iShares
Barclays CMBS Bond Fund (NYSEArca:CMBS), a fund that taps into
investment-grade commercial mortgage-backed securities, which are
in essence securities that represent interests in "pools" of
commercial mortgages. It costs 0.25 percent.
CMBS also beat to market a similar ETF SSgA has had in the works
since 2010. Commercial mortgage-backed securities could be a
prospective segment as retail improves, and the demand for property
related to business expansion picks up.
Rounding up the launch are two ETFs focused on government
First, there is the iShares Barclays U.S. Treasury Bond Fund
(NYSEArca:GOVT). The ETF invests in Treasurys with at least one
year to maturity, and that have a minimum of $250 million of
outstanding face value. The Treasurys also need to be fixed-rate
The fund, which costs 0.15 percent, will join more than 40
Treasury-focused ETFs on the market today, including six funds by
iShares that tap into various maturities within the yield
Today's rollout also includes the iShares Barclays GNMA Bond
Fund (NasdaqGM:GNMA), the only one of the seven that iShares is
listing on Nasdaq rather than Arca, the New York Stock Exchange's
electronic trading platform. iShares has been diversifying its
primary listings recently to include more funds on Nasdaq as well
as BATS, the No. 3 U.S. stock exchange that launched a primary
GNMA's underlying index measures the performance of
mortgage-backed pass-through securities issued by the Government
National Mortgage Association, also known as Ginnie Mae. The fund
will focus on bonds with 30- or 15-year maturities, according to
regulatory paperwork iShares filed recently.
GNMA comes with an annual expense ratio of 0.32 percent.
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