BlackRock launches series of TIPS ETFs as Fed battles inflation

“Post-COVID, investors are much more aware of the effects of inflation and how it can reduce their purchasing power over time,” she said. “We’ve seen a lot of requests for ways to build more inflation protection in portfolios.”

BlackRock’s iShares iBonds ETFs are designed to mature like a bond, while trading on an exchange like a stock and sharing the characteristics of a fund in providing exposure to a group of securities. The firm’s offering of such ETFs started off in 2010 with municipal bonds before expanding into corporate debt and Treasurys, with investors often using them to build ladders based on their maturities, according to Veraa.

“Now we’re doing TIPS,” she said, of Treasury inflation-protected securities.

The firm’s iBonds ETFs have a total $23 billion of assets under management, the bulk of which is invested by financial advisers on behalf of their clients, according to Veraa. Individual investors also purchase them on their own, she said.

“iBonds ETFs hold diverse bonds with matching maturity dates,” with each fund providing regular interest payments and distributing “a final payout in its stated maturity year,” according to BlackRock. 

Looking across the spectrum of its offering, Veraa said that “generally a lot of people are still sticking to shorter maturities,” with most of the assets in the firm’s one-to-five year iBonds.

As for the cost of the new TIPS defined maturity bond ETFs, the funds have a 0.1% expense ratio, according to BlackRock.

Meanwhile, the Federal Reserve continues to battle inflation in the U.S. that remains above its target despite the rate slowing over the past year. 

The central bank is “committed to achieving and sustaining a stance of monetary policy that is sufficiently restrictive to bring inflation down to our 2 percent goal over time,” Fed Chair Jerome Powell said Wednesday, in prepared remarks after ending its two-day policy meeting.