BlackRock has begun rolling out its ‘iBonds’ ETFs in Europe.
Brett Pybus, Global Co-Head of iShares Fixed Income ETFs at BlackRock.
A first for the continent, the suite consists of fixed income ETFs that target bonds maturing in a specific year.
Unlike conventional fixed income ETFs, which hold bonds for a limited period of time to maintain a specific maturity exposure, iBonds ETFs hold their underlying bonds until maturity at which point the fund liquidates.
iBonds ETFs offer regular income (distributions are made quarterly) as well as a lump sum payment at termination, thereby acting similarly to individual bonds but with increased liquidity due to the ETF structure.
By combining iBonds ETFs of varying maturities, investors can build portfolios that meet their future cash requirements.
Brett Pybus, Global Co-Head of iShares Fixed Income ETFs at BlackRock, commented: “iBonds ETFs are designed to mature like a bond, trade like a stock, and diversify like a fund, all in a cost-efficient and transparent ETF wrapper. The fixed maturity nature of iBonds ETFs aims to offer investors clarity into their yield expectations and investment horizon. Bond ETFs are increasingly being used as an alternative to picking individual bonds which can be costly for investors.”
BlackRock first introduced its iBonds ETFs in the US in 2010 and now offers 37 funds collectively housing over $21 billion in assets across US Treasury, investment-grade corporate, high yield, and municipal bond exposures.
The US-listed iBonds offering has soared in popularity recently, generating net inflows of $8.1bn over 2022 and a further $5.2bn year-to-date in 2023 (as of the end of July). BlackRock is expecting similar success in Europe where fixed income ETFs have had a record start to the year with $28.2bn net inflows YTD.
BlackRock’s initial iBonds suite in Europe consists of four funds providing exposure to US dollar- or euro-denominated corporate bonds that mature in December 2026 or 2028.
The iShares iBonds Dec 2026 Term $ Corp UCITS ETF (ID26) and iShares iBonds Dec 2028 Term $ Corp UCITS ETF (ID28) have been listed on London Stock Exchange and Euronext Amsterdam in US dollars as well as on Deutsche Börse Xetra in euros. Accumulating share classes are also available.
The iShares iBonds Dec 2026 Term € Corp UCITS ETF (IB26) and iShares iBonds Dec 2028 Term € Corp UCITS ETF (IB28), meanwhile, have thus far been listed on Xetra in euros.
Each iBonds ETF comes with an expense ratio of 0.12%.
The funds are linked to USD- and EUR-specific versions of Bloomberg MSCI Corporate ESG Screened Indices which consist of fixed-rate, investment-grade corporate bonds across countries and economic sectors. Eligible issues must have a minimum $300 million or €300m par amount outstanding.
Each index excludes violators of UN Global Compact principles, companies embroiled in severe ESG-related controversies, and firms with business activities linked to controversial and nuclear weapons, civilian firearms, tobacco, thermal coal, and oil sands.
Due to the indices’ ESG screening, each ETF is classified as an Article 8 product under the European Union’s Sustainable Finance Disclosure Regulation (SFDR).