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BlackRock makes cuts to fees on $35bn in bond ETFs

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BlackRock has shaved fees on two bond ETFs amid strong flows and price competition.

Fees on the $25.5bn iShares MBS ETF dropped 2 basis points to 4 bps, and expenses on the $9.1bn iShares 0-5 Year Tips Bond ETF fell 1 bp to 3 bps, the company said last week.

The fee cuts “will further empower investors to manage risk and their portfolios” in an economic environment of continued inflation and rising interest rates, said Steve Laipply, head of bond ETFs at BlackRock.

The cuts place the MBS ETF’s price on par with its biggest competitors. Last month, Vanguard announced that the fee of its $15.3bn Mortgage-Backed Securities ETF slipped 1 bp to 4 bps, as part of a slew of expense reductions. State Street’s $4.2bn SPDR Portfolio Mortgage-Backed Bond ETF also charges 4 bps, or 2 bps less than it did before last March.

This article was previously published by Ignites, a title owned by the FT Group.

The iShares MBS ETF collected $913m in net flows last year, according to Morningstar Direct. The Vanguard Mortgage-Backed Securities ETF, meanwhile, added $2.6bn, and the SPDR Portfolio Mortgage-Backed Bond ETF garnered $1.5bn.

iShares’ short-term Tips strategy has long been the cheapest ETF to invest in inflation-protected securities. It focuses on the shorter end of the duration spectrum compared with its bigger brother, the $38.6bn iShares Tips ETF, which charges 19 bps.

Tips funds have been broadly popular with investors amid rising inflation. Inflation-protected bond ETFs took in $40.2bn last year, according to Morningstar Direct, making it the fifth-best-selling category in the Chicago-based researcher’s database, and the top-selling segment within fixed income.

The 0-5 Year Tips Bond ETF took in just under $6bn last year, while the Tips Bond ETF amassed $12bn, according to Morningstar Direct.

BlackRock has suggested that investors place more money into inflation-protected strategies in 2022. Prices for such strategies will continue to rise faster than pre-pandemic levels, according to BlackRock’s investment outlook, which suggests that investors should be “positioning portfolios to live with inflation” in their fixed-income holdings by piling money into inflation-protected and floating-rate bonds.

Overall, BlackRock’s US ETFs collected $209bn in inflows last year, according to Morningstar’s database, second only to Vanguard’s $327bn haul.

*Ignites is a news service published by FT Specialist for professionals working in the asset management industry. It covers everything from new product launches to regulations and industry trends. Trials and subscriptions are available at ignitesasia.com.

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