BlackRock, one of the leading asset managers, has recently joined the trend of launching actively managed bond ETFs. The company introduced the BlackRock Total Return ETF, which is an ETF version of its popular total return mutual fund. This move comes on the heels of BlackRock’s successful launch of the Flexible Income ETF, which now holds $413.4 million in assets.
The BlackRock Total Return ETF is managed by Rick Rieder, the Chief Investment Officer of Global Fixed Income at BlackRock. Rieder previously managed the Flexible Income ETF, which has been quite successful. With the new ETF, BlackRock aims to continue delivering attractive returns to investors.
The investor share class of the BlackRock Total Return mutual fund, which holds a Morningstar three-star gold-medal status, has outperformed 63% of its intermediate core-plus bond peers over the past 15 years. This achievement highlights BlackRock’s solid track record in the bond market.
Other prominent fund managers have also jumped on the ETF bandwagon this year. Firms like Pimco, Franklin Templeton, and T. Rowe Price have all launched ETFs with well-known managers at the helm.
The BlackRock Total Return ETF is designed to be a diversified core bond strategy that seeks out alpha opportunities across the fixed income landscape. The firm aims to deliver consistent and attractive returns to investors throughout all market cycles.
David Rogal, the lead portfolio manager of the BlackRock Total Return ETF, emphasizes the strategy’s focus on providing clients with a well-diversified portfolio. The team aims to navigate various market cycles by identifying significant macro trends and combining them with careful bottom-up security selection.
This growing interest in active ETFs from major asset managers indicates a shift in investment strategies. With their ability to uncover alpha opportunities and deliver consistent returns, active ETFs are becoming an increasingly popular choice for investors looking to enhance their portfolios.
The Rise of Active ETFs
The strategy introduced here takes a broad multisector approach, offering substantial investment flexibility to manage downside risk and provide long-term portfolio diversification. In addition, it acts as an income cushion, making it an appealing choice for bond portfolios.
As a retail investor, navigating the vast landscape of over 60,000 global fixed-income securities can be challenging. This is where active management comes into play, distinguishing winners from losers and offering a compelling solution for bond investments.
With a staggering $9.1 trillion in assets, the world’s largest asset manager strongly emphasizes its commitment to ETFs with this recent launch. ETFs not only provide investors with liquidity but also offer tax efficiency.
In a similar vein, Vanguard, a key competitor, recently introduced their second active bond ETF—the Vanguard Core-Plus Bond ETF. Furthermore, they have plans to launch a third option, the Vanguard Core Bond ETF, by the end of this year.
Active ETFs have experienced explosive growth in recent times. Ryan Jackson, manager research analyst for passive strategies at Morningstar Research Services, highlights how these ETFs have attracted over $25 billion each year since 2018, achieving an impressive organic growth rate exceeding 30%. By the end of November, active ETFs boasted approximately $500 billion in assets, nearly tripling the amount from the previous year.
“The rapid growth of active ETFs has proved that ETFs are no longer limited to index management,” states Dominik Rohe, head of Americas ETF and index investments business at BlackRock.
In conclusion, the surge in popularity of active ETFs signals a clear shift in the investment landscape. As investors recognize the advantages they offer beyond traditional index management, these dynamic funds continue to gain momentum.