BlackRock's Rick Rieder: Active Fixed Income ETFs Are Underestimated
BlackRock's Chief Investment Officer of Fixed Income, Rick Rieder, believes that investors often overlook the potential of actively managed fixed income exchange-traded funds (ETFs). In an interview with CNBC's "ETF Edge," Rieder highlighted the success of BlackRock's newest fixed income fund, the BlackRock Flexible Income ETF (BINC), attributing its outperformance to strategic allocations based on current market opportunities.
Unlocking Opportunities through Active Management
Rieder, who oversees approximately $2.6 trillion in fixed income assets, emphasized the advantage of active ETFs in fixed income. He explained that the flexibility of active management allows for timely adjustments to take advantage of market opportunities. This ability to navigate and adapt to changing market conditions sets active ETFs apart from their passive counterparts.
Strong Performance and Allocations
Since its debut on May 23, BINC has gained 0.28%, while benchmark ETFs such as iShares Core US Aggregate Bond ETF (AGG) and iShares iBoxx $ High Yield Corporate Bond ETF (HYG) experienced declines of 3.89% and 0.16% respectively during the same period. The largest allocation in BINC is currently in non-U.S. credit, accounting for approximately 22% of the ETF's holdings. U.S. high yield credit follows closely at nearly 17%, with U.S. investment grade credit making up around 14% of the total allocations. Additionally, approximately 30% of the fund's holdings originate from outside the U.S.
Capitalizing on Overseas Opportunities
Rieder attributed BINC's success to opportunities presented by a stronger dollar, particularly for U.S. investors. He explained that while European or Japanese investors face challenges in purchasing U.S. assets due to high currency hedging costs, dollar investors can benefit significantly. BINC has capitalized on emerging market fixed income opportunities in countries like Brazil and Mexico. Furthermore, Europe plays a substantial role in the fund's allocation due to favorable currency swap rates.
Active Management for Yield and Volatility
Rieder emphasized the advantages of active management beyond seizing opportunities. He highlighted the importance of building a portfolio with higher yield than the index and strategically managing volatility. By actively selecting investments and eliminating undesirable assets, investors can potentially generate an additional 50 to 75 basis points per year. This approach aims to enhance yield while actively managing risk.
In conclusion, Rick Rieder's insights shed light on the underestimated potential of actively managed fixed income ETFs. The success of BlackRock's BINC demonstrates the value of active management in capturing market opportunities and optimizing portfolio performance. As investors navigate the fixed income landscape, Rieder's perspective encourages a closer examination of the benefits that active management can bring.
Active Fixed Income ETFs: A Hidden Gem in Investment?
Rick Rieder, BlackRock's Chief Investment Officer of Fixed Income, has shed light on the overlooked potential of actively managed fixed income ETFs. His insights offer a fresh perspective that could significantly impact the strategies of new business formations.
Capitalizing on Active Management
Rieder's emphasis on the value of active management in fixed income ETFs presents a compelling argument for new businesses. The ability to adapt and seize market opportunities, as demonstrated by BlackRock's Flexible Income ETF (BINC), could be a game-changer for businesses looking to maximize their investment returns.
Overseas Opportunities and Portfolio Diversification
Rieder's strategy of capitalizing on overseas opportunities, particularly in emerging markets like Brazil and Mexico, underscores the importance of global diversification. For new businesses, this approach could offer a pathway to mitigate risk and enhance returns, especially in a volatile economic environment.
Yield Enhancement and Risk Management
Rieder's approach to active management extends beyond seizing opportunities. He advocates for building a portfolio with a higher yield than the index and managing volatility aggressively. This strategy could be a boon for new businesses, potentially generating additional returns and effectively managing risk.
In essence, Rieder's insights into the underestimated potential of actively managed fixed income ETFs could revolutionize investment strategies for new businesses. His emphasis on active management, global diversification, and strategic risk management presents a compelling case for businesses to reconsider their investment approaches. As the business landscape continues to evolve, Rieder's perspective offers valuable guidance for businesses navigating the complex world of investment.