BlackRock Australia will expand its fixed income exchange-traded fund (ETF) range with the addition of a new offering focused on long-term United States government bonds.
The new fund, the iShares 20+ Year US Treasury Bond ETF (AUD Hedged), with the Australian Securities Exchange (ASX) code ULTB, will have a management fee of 15 basis points and be benchmarked to the ICE US Treasury 20+Year Bond AUD Hedged index.
ULTB is expected to list on the ASX in early September and will have the longest duration exposure available among the locally listed iShares products.
BlackRock Australasia wealth distribution director James Waterworth said the addition of ULTB to the iShares products offered in the Australian market follows requests from advisers and investors for more choice around precise fixed income exposures.
“Bond yields globally are at decade highs and if inflation indicators continue to fall, central banks may proceed to cut official cash rates,” Waterworth said.
“We believe investors have a window of opportunity to move out of cash and into fixed income exposures to lock in these higher yields because the market has tended to price in changes to cash rates well before they occur.
“This could be achieved by long-end bond exposures like ULTB, which enable Australian investors to add duration in a simple and low-cost way,” he said, noting BlackRock also offers an Australian long-duration government bond exposure ETF, ALTB, which was launched in June.
BlackRock Australasia iShares and index investments specialist Tamara Stats added US Treasury bonds were considered to be a high-quality asset due to a low level of default risk, which offered defensive benefits to the broader portfolio.
“The historic inverse relationship between stocks and bonds has been challenged in recent years. As inflation starts to return to target, we may see the historic correlation restored. Therefore, ULTB could be a very useful tool for portfolio diversification,” Stats said.
“Hedged to the Australian dollar, ULTB also offers Australian investors an additional layer of stability without having to weather the ups and downs of foreign exchange risk.”
The new fund expands the number of fixed income ETFs available via Blackrock to 12 and the total number of ETFs in the local market to 52.
