BlackRock thinks the time is now for a more ‘modernized’ exposure to bonds
From corporate bonds to bank loans, income investors have a lot of choices these days. While many use core bond funds for their fixed-income exposure, BlackRock believes the time is right for an exchange-traded fund that goes beyond those core and core-plus offerings. Last week, the $13.5 trillion money manager launched iShares Total USD Fixed Income Market ETF ( BTOT ), which it says provides comprehensive exposure to the taxable fixed income market. Core bond funds, like the iShares Core U.S. Aggregate Bond ETF , seek to track the performance of the U.S. investment-grade bond market, while plus offerings can add in exposure to areas such as high-yield bonds. The broad diversification in BTOT can help provide resilience in an environment of increased interest rate volatility, BlackRock pointed out. The bond market also looks different these days, evolving since the original indexes — the precursors to the Bloomberg U.S. Aggregate Index — were launched decades ago, said Steve Laipply, global co-head of iShares fixed income ETFs. “Since then, you’ve seen a lot of innovation in the market. You’ve seen inflation-protected securities. You’ve seen bank loans become an asset class that investors want to access. You’ve seen various types of securitized assets come to market,” he said. “We wanted to basically come up with a more modernized exposure.” The ETF also holds floating-rate notes, which can help modulate between credit risk and duration risk, Laipply noted. BTOT tracks an index it developed with Bloomberg, the Bloomberg U.S. Total Fixed Income Market Index. The index expands exposure to the market by 28% beyond the Aggregate Index, according to BlackRock. The fund has a 0.09% net expense ratio , but it is too early to calculate a 30-day SEC yield. It has slightly more credit risk but lower duration risk than the Aggregate Index, as well as a slightly higher yield, Laipply said. It has about 3.7% of its portfolioin Treasury inflation-protected securities, and around 3.5% in bank loans, he noted. “Bank loans offer another means to gain exposure to the high yield sector, albeit in floating rate form, which allows for reduced interest rate sensitivity,” he said. “Bank loans historically have had higher recovery rates than comparably rated high yield bonds.” Overall Laipply is feeling bullish about the opportunities across fixed income in 2026. “It is a generational opportunity in fixed income,” he said. “We think it’s going to continue to be.”
<
