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BlackRock Opens Bond ETFs Aimed at Institutional Clients

BlackRock Inc. (BLK), the largest provider of exchange-traded funds, is opening four fixed-income ETFs today with defined maturity dates to appeal to institutional investors such as bank treasurers.

BlackRock’s iSharesBond ETFs, which invest in a basket of investment-grade corporate bonds, have set expiration dates when the portfolios will be liquidated and payouts made to investors, according to Matt Tucker, head of iShares’ fixed-income strategy team at New York-based BlackRock. The funds, maturing in 2016, 2018, 2020 and 2023, provide monthly income and may be favored by clients with specific liquidity needs in a climate of low yields and volatile interest rates, according to the firm.

“For some institutional investors, the idea that an ETF never matures or liquidates has been a hurdle,” Tucker said in a telephone interview yesterday. “These funds have the pricing and liquidity of an ETF plus the finite life you get with an individual bond portfolio.”

Slideshow: 12 Things You Need to Know About ETFs

BlackRock, whose $3.9 trillion in assets make it the world’s biggest money manager, said first-quarter profit rose 10 percent as investors flocked to its equity iShares products. President Robert Kapito said in February the firm will continue to grow through fixed-income ETFs, which represent less than 0.5 percent of the $98 trillion global bond market. BlackRock created a series of lower-fee ETFs in 2012, and in March it announced a partnership with Fidelity Investments to sell more iShares funds directly to retail investors.

The iSharesBond ETFs track Barclays indexes that only allow for exposure to bonds within a certain maturity range. The funds, which exclude financial firms, invest in debt issued by companies such as AT&T Inc. (T), Anheuser-Busch InBev NV (ABI), United Technologies Corp. and Verizon Communications Inc. BlackRock opened finite-life municipal bond ETFs in 2010.

Investors are becoming more concerned about the potential for rising interest rates and money is moving into products that might better protect them, Tucker said. The iSharesBond funds shield clients from increasing rates by enabling them to invest for a set term, he said.

To contact the reporter on this story: Alexis Leondis in New York at aleondis@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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