Barclays Global Investors’ bond exchange-traded-funds, introduced in 2002 and 2003, opened the low-cost, but hard-to-get into U.S. government bond market to the masses, according to the Financial Times. Barclay’s fixed-income iShares started as funds that tracked Treasury bills of various maturities, one tracking Treasury inflation-protected securities (TIPS), one tracking corporate bonds, and one tracking an investment-grade bond index. The products have proven so popular Barclays released eight new bond ETFs, making a total of 14 bond funds, and already has plans for at least two more. For individual investors, fixed-income investing is hard, since large institutions control much of the $4 billion Treasury bonds in circulation. ETFs help by offering a low-cost way to buy into a ready-made index. “If an individual goes through a brokerage account, they can pay between 50-100 basis points to trade a U.S. Treasury security, and much of that cost is hidden from view,” said Matt Tucker, head of U.S. fixed income solutions at BGI. “But if BGI does that same transaction through an iShares fund, we as an institution can trade at a fraction of the cost,” he said. ETFs also have lower expense ratios than fixed-income mutual funds, for example 15 or 20 basis points for a BGI ETF, compared to more than 100 for a mutual fund. “The idea is to provide one-stop shopping for the investor who wants diversified exposure present in a broad benchmark, and also allow the more sophisticated investor to customize exposures to meet their risk and return targets,” said Tucker. The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.
