Last week, Blackrock made a significant move by launching its first actively managed ETF for fixed-income assets. The exchange-traded fund, with the ticker symbol IFLX, is managed by a team led by bond specialist Rick Rieder.
According to Fortune magazine, Rieder is the world’s largest asset manager, overseeing assets worth $2.4 trillion. To put that into perspective, the Norwegian oil fund is valued at approximately $1.8 trillion.
Rieder believes that we are currently in a “golden era for fixed-income assets.” He points out that the Federal Reserve may keep its interest rates at a high of 4.25%-4.5%. Even though the European Central Bank is expected to cut rates further, the “terminal rate” will still be significantly higher than historical levels, according to the investment chief.
“Real rates are at their highest levels in a decade. This means you can generate returns of around 6% or more without taking excessive risks,” says Rieder.
Blackrock’s new fund, IFLX, will focus on Europe, where Rieder sees plenty of opportunities to lock in coupon rates at attractive levels. He highlights mortgage-backed securities and packages of corporate bonds as potential targets.
“The European market for fixed-income assets offers an attractive risk-adjusted return. Currently, the fund’s yield-to-worst is at 5.4%,” says Rick Rieder.
When asked about the major economic and global events to watch out for in 2025, Rieder emphasizes monitoring trade policies, elections, labor market dynamics, and fiscal challenges – all factors that could lead to volatility throughout the year. The strategy remains focused on high-quality exposures and income-generating assets (such as bonds).
In a world where every basis point counts, fund managers are constantly seeking that extra edge. In the pursuit of maximizing returns while managing risks, some are turning away from traditional investments like real estate investment trusts (REITs) and exploring other avenues where the potential for growth is higher.
As Blackrock’s IFLX enters the market, it represents not only a new investment opportunity but also a testament to the changing landscape of asset management. With Rieder at the helm, investors can expect a strategic approach that leverages the current market conditions to deliver competitive returns.
In conclusion, Blackrock’s foray into actively managed fixed-income ETFs signals a shift towards more dynamic and opportunistic investment strategies. With Rieder’s expertise and the team’s focus on European markets, the IFLX fund presents an enticing opportunity for investors looking to capitalize on the current economic environment.