As the actively managed exchange traded fund space heats up, BlackRock has filed to launch fixed-income ETFs that will not track an underlying index.
"There are different levels of active management," Timothy Strauts, fixed-income ETF analyst at Morningstar, said in an Investment News report. "It seems like they're trying to differentiate themselves from Bill Gross and his really active strategy by saying there will be rules the ETFs follow, but if you're going to follow the rules, why not just put it into an index?"
According to Strauts, Morningstar will likely classify the new bond ETFs as active since they do not track an index. BlackRock will use a rules-based methodology, indicating managers won't pick stocks, and holdings will be revealed daily, according to the report. [Schwab Files to Introduce Actively Managed ETFs]
The recent launch of PIMCO Total Return ETF (TRXT) created renewed interest in the actively managed ETF sector. iShares, the ETF arm of BlackRock, also launched a new fund, iShares Ultrashort Bond Fund. It will focus on the investment opportunities between what money markets can invest in and the short-term Treasury market, reports Jason Kephart for Investment News.
Short-term bond funds allow investors the freedom to protect capital in bonds without the interest rate risk that is connected to long term debt. [PIMCO Total Return ETF is an Active Fund Trailblazer]
The iShares Sovereign Screened Global Bond Fund is also in the works, and it will be the only ETF so far that includes both developed and emerging market government debt in the same investment. [ETF Spotlight: High-Yield Corporate Bonds]
Tisha Guerrero contributed to this article.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.