BlackRock (NYSE:BLK), the world's largest asset manager with $2.4 trillion under management, launched a new active fixed income Exchange Traded Fund (ETF) on Wednesday. This latest addition marks the 422nd ETF in BlackRock's portfolio and is the second active fixed-income ETF managed by Rick Rieder, the company's Chief Investment Officer (CIO) of global fixed income.
The new ETF mirrors its mutual fund counterpart, the BlackRock Total Return Fund, investing its holdings into a diversified portfolio of fixed-income securities. Notably, however, the ETF comes with a lower expense ratio of 0.34%, compared to the mutual fund's 0.45% expense ratio. Additionally, the ETF is designed to offer more liquidity and greater transparency of its holdings while facilitating intraday trading.
This move by BlackRock is seen as part of a larger trend in the asset management industry. Active fixed-income ETFs have been increasingly gaining market share from mutual funds and passive fixed-income funds. A growing number of asset managers are either converting their mutual funds into ETFs or offering dual options to investors.
The shift towards active fixed-income ETFs is primarily driven by increasing comfort with the category among advisors and institutions. The current economic climate appears to offer significant opportunities in this space, despite potential headwinds stemming from a hawkish Federal Reserve and rising risk of recession. It is believed that active managers are better equipped to navigate these challenging conditions.
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