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Are ETFs the toolkit investors need for the ‘new regime’?

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According to BlackRock and iShares, investors are being provided with an ever-increasing amount of building blocks to express their investment views.

The investing journey has changed “quite dramatically”, according to iShares ETF and index investments specialist at BlackRock Australasia, Tamara Stats.

Faced with a “clearly different” regime, Ms Stats believes that it is becoming ever more critical for investors to utilise transparent and accessible tools like ETFs.

“The views that investors ultimately employ, of course, depend on their own time horizons and risk appetite,” she said at a recent BlackRock roundtable.

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“What I can say though, when it comes to navigating this new, very different regime as an investor, is that you need a toolkit, and that toolkit has had to get a little bit larger, particularly recently, if you want to express more precise investment views.”

Looking at the latest ETF data as a gauge of investor sentiment, Ms Stats said that the “flows don’t lie” and appear to lend credence to the phrase “bonds are back”. 

Across all of its products globally, iShares has seen inflows of close to US$18 billion into broad fixed income, compared to outflows of US$9 billion from broad equity exposures.

“Given that sort of brutal trade-off that central bankers face between fighting inflation but not causing too much pain and damage, it seems as though the fight against inflation is still one that has to be made,” said Ms Stats.

“It looks as though rates are going to stay higher, possibly higher than where they are right now, and for a little bit longer, so we’ve, of course, been paying pretty close attention to fixed income as an asset class.”

On some of the specific trends being seen within the asset class, Ms Stats pointed out that the US-listed iShares Short Treasury Bond ETF has recorded its largest gains ever.

This focus on the short-term has also been seen locally, with $90 million flowing into the cash-like iShares Core Cash ETF (BILL) last month. Comparatively, the iShares Core Global Corporate Bond (AUD Hedged) ETF (IHCB) had $46 million of net flows during February.

“The granularity in fixed income exposures is becoming important and we think that it makes sense to be precise in your allocations, and the flows are kind of demonstrating that as well,” said Ms Stats.

Ms Stats also touched on the recent fee cuts announced by BlackRock for its iShares Core S&P/ASX 200 ETF (IOZ) as well as its iShares Core Composite Bond ETF (IAF).

“We recognise that the ETF channel is one of the most effective ways to champion investor progress and democratise investing. It’s one of our key purpose statements here at BlackRock and the use case for ETFs has just continued to expand from institutions to individuals,” she said.

“We know that this is a really viable and valid way to express an investment view and core exposures, in particular, certainly lend themselves to economies of scale. So, as a result, we’ve been able to reduce, quite drastically actually, the price on two of our core tickers.”

Speaking to InvestorDaily about the importance of ETFs following BlackRock’s roundtable, Ms Stats noted that investment views are “many and varied” depending on individual investors.

“How you express them is what ETFs give you. It’s an enabler for expressing an investment view. It’s transparent, low cost, accessible, so it’s kind of ‘tick, tick, tick’ on actually expressing an investment view,” she said.

“We’re seeing the exposures become more and more granular. We’ve got 40 ETFs listed locally and a lot of thought and development goes into what we actually create from a product development point of view and which index providers we work with.

“Globally though, we have a thousand. You know, the really pleasing thing about BlackRock Australia, is we really feel like a microcosm of BlackRock globally … We’re able to curate all of that global intelligence and technology and apply that to our own offerings for local investors.”

When asked about iShares’ plans for future ETFs, Ms Stats was unable to comment specifically, but said that the company has a strong pipeline of products that it believes are the “key building blocks for investor portfolios taking a multi-asset lens”.

Are ETFs the toolkit investors need for the ‘new regime’?

According to BlackRock and iShares, investors are being provided with an ever-increasing amount of building blocks to express their investment views.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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