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BlackRock is launching a second exchange-traded fund actively managed by the firm’s chief investment officer of global fixed income Rick Rieder, an ETF with a strategy similar to his total return mutual fund.
The new BlackRock Total Return ETF, a diversified core bond fund that will begin trading Thursday under the ticker BRTR, follows the May launch of Rieder’s actively managed BlackRock Flexible Income ETF
BINC.
“I’ve been pretty blown away by the growth of ETF demand,” Rieder said in a phone interview.
Actively managed ETFs are a fast-growing area of the almost $7.8 trillion U.S.-listed exchange-traded fund industry, taking in 21% of all inflows this year, according to CFRA Research’s head of ETF data and analytics Aniket Ullal. That’s despite representing a relatively small portion of the U.S. industry’s overall assets at just 6.1%, an email from Ullal shows.
The active BlackRock Total Return ETF, which is benchmarked to the Bloomberg US Aggregate Bond Index, is run by Rieder, David Rogal and Chi Chen — the same trio of portfolio managers for the firm’s total return mutual fund MPHQX. Investors like ETFs in part for their ease of trading and tax efficiency, with BlackRock providing people a choice, said Rieder.
Meanwhile, the actively managed BlackRock Flexible Income ETF, which may invest in debt globally, has gained 5.7% on a total return basis since its first day of trading on May 23 through Wednesday, FactSet data show. That exceeds the 2.3% total return of the iShares Core U.S. Aggregate Bond ETF
AGG,
which tracks an index of U.S. investment-grade bonds.
The BlackRock Flexible Income ETF aims to be higher yielding compared with core fixed income, according to the firm. Rieder said the ETF is running at a 7% annual yield.
As of Dec. 12, the fund’s portfolio included both investment-grade and high-yield corporate bonds, securitized debt, agency mortgage-backed securities and emerging-market debt, according to a spokesperson for BlackRock.
The BlackRock Flexible Income ETF has accumulated $411 million of assets under management within seven months of its launch, FactSet data show.
“Actively managed ETFs are a greater share of new fund launches and investor appetite for active products is strong,” BofA Global Research analysts said in a note earlier this month.
BOFA GLOBAL RESEARCH NOTE DATED DEC. 6, 2023
Within active ETFs, BlackRock has $13 billion in assets under management across 36 products, according to a statement from the firm.
Active ETFs represent about a third of the total number of U.S.-listed exchange-traded funds, according to CFRA’s Ullal. “The active bond ETF space is likely to see increased flows and competition for assets next year,” he said in a note on ETF trends to watch in 2024.
