BlackRock Strengthens Active ETF Platform with Two ETFs

Rhea-AI Summary

BlackRock launched two new ETFs: the BlackRock Long-Term U.S. Equity ETF (BELT) and the BlackRock High Yield ETF (BRHY). These ETFs are managed by BlackRock’s Strategic Equity and High Yield teams, respectively, and aim to provide liquidity, tax efficiency, and alpha. BELT focuses on long-term growth in U.S. equities, maintaining a concentrated portfolio of 20-25 positions. BRHY targets non-investment grade bonds with maturities of 10 years or less. With these launches, BlackRock now manages $25 billion across 40 active ETFs in the U.S. and has seen a significant increase in active ETF adoption.

Positive

• Launch of BELT and BRHY ETFs expands BlackRock's active ETF offerings.
• Active ETF assets managed by BlackRock have nearly doubled in the past year to $25 billion.
• 93% of BlackRock’s actively managed taxable fixed income and 79% of fundamental equity AUM outperformed benchmarks over the last five years.
• BELT ETF focuses on long-term U.S. equity growth with a high-conviction strategy.
• BRHY ETF aims to maximize total return by investing in non-investment grade bonds.
• $15 billion in active net inflows globally in Q1 2024.
• Positive active flows for 17 of the past 21 quarters since 2019.

Negative

• High-conviction strategy for BELT carries higher risk due to concentrated portfolio.
• BRHY ETF's focus on non-investment grade bonds involves higher credit risk.
• Market conditions and credit dynamics can adversely affect ETF performance.

Insights

Financial Analyst

BlackRock's launch of the new ETFs—the BlackRock Long-Term U.S. Equity ETF (BELT) and the BlackRock High Yield ETF (BRHY)—is a significant move in the asset management industry. These ETFs aim to capture alpha by leveraging BlackRock’s extensive expertise in equity and fixed income management. Given the company's $25 billion in assets under management across 40 active ETFs in the U.S. alone, this expansion solidifies BlackRock's position in the active ETF market.

For retail investors, it's essential to understand that an ETF's performance hinges on the underlying assets and the managers' ability to generate returns. BELT focuses on a concentrated portfolio of 20 to 25 high-conviction U.S. equities, which means it's designed for long-term growth but inherently carries higher risk due to its concentrated nature. BRHY, on the other hand, aims to maximize returns through non-investment grade bonds, providing a potentially high yield opportunity but also higher risk, especially in volatile credit markets.

What stands out is BlackRock's ability to adapt to market conditions. Active ETFs offer liquidity, tax efficiency and the flexibility to adjust holdings dynamically, which can be advantageous during market shifts. However, investors should be cautious of the fees associated with active management and compare them to passive alternatives to ensure they align with their investment goals.

Another key aspect is the performance benchmark: BELT uses the S&P 500 Index and BRHY uses the Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index. Investors should monitor how these ETFs perform against these benchmarks to gauge their effectiveness and the managers' value-add.

Market Research Analyst

BlackRock's recent addition to its ETF lineup highlights the growing trend towards active ETFs. This market segment has seen substantial growth, particularly among registered investment advisors who use them as building blocks for model portfolios. The nearly doubling of BlackRock's active ETF offerings in the past year underscores the increasing demand for these products.

From a market perspective, active ETFs offer a compelling proposition by blending the benefits of both active management and the ETF structure. They provide liquidity and tax efficiency, which are attractive features for both retail and institutional investors. The ability of portfolio managers to actively adjust holdings allows for a more responsive investment strategy, potentially leading to better performance in fluctuating markets.

Moreover, BlackRock's track record in delivering alpha—93% of their taxable fixed income AUM and 79% of their fundamental equity AUM outperforming benchmarks over the last five years—adds credibility to these new offerings. However, investors should remain mindful of the risks associated with these strategies, particularly in the high-yield bond segment.

First ETFs Managed by BlackRock’s Strategic Equity and High Yield Teams

NEW YORK--(BUSINESS WIRE)-- Today, BlackRock expanded access to its alpha-seeking expertise with the launch of the BlackRock Long-Term U.S. Equity ETF (Nasdaq: BELT) and the BlackRock High Yield ETF (Nasdaq: BRHY). These launches reinforce BlackRock’s commitment to delivering liquidity, tax efficiency, and alpha in the convenience of an ETF.

“Active ETFs are becoming an integral part of investor portfolios around the world, with financial advisors increasingly incorporating them into their models-based practice,” said Jessica Tan, Head of Americas for Global Product Solutions at BlackRock. “As a fiduciary, we’re listening to our clients and creating new products and capabilities to meet their needs. We are excited for the journey ahead and look forward to decades of innovation to come.”

Evolving market conditions and changes in distribution dynamics have catalyzed the growth of active ETFs. For example, registered investment advisors are using active ETFs as building blocks in model portfolios, accounting for nearly 50% of all active ETF assets, up from 31% in 2019.¹ In addition, active ETFs enable portfolio managers to react to changing market conditions, providing flexibility to adjust their holdings as they seek to outperform benchmarks or target certain investment outcomes.

Alpha-seeking expertise, accessible through ETFs

As adoption continues to grow, BlackRock has nearly doubled its number of active ETFs in the past year, managing $25 billion in assets under management (AUM) across 40 active ETFs in the U.S.²

BlackRock has a strong track record of delivering alpha, with 93% and 79% of BlackRock’s actively managed taxable fixed income and fundamental equity AUM, respectively, outperforming the benchmark or peer median over the last five years.³ In addition, in the first quarter of 2024, clients entrusted BlackRock with $15 billion of active net inflows globally, generating positive active flows in 17 of 21 quarters since 2019.⁴

Fund Name	Ticker	Performance Benchmark	Portfolio Managers
BlackRock Long-Term U.S. Equity ETF	BELT	S&P 500 Index	Alister Hibbert Michael Constantis
BlackRock High Yield ETF	BRHY	Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index	David Delbos Mitchell Garfin

BlackRock Long-Term U.S. Equity ETF (BELT)

BELT seeks long-term growth by investing in a high conviction portfolio of U.S. equities. The investment team focuses on a company’s ability to sustain high returns, its reinvestment opportunity, and its ability to differentiate itself from the competition over the long-term. This fundamentally driven investment process results in a concentrated portfolio of 20 to 25 positions that the investment team believes can compound growth in a way that is underappreciated by the market.

“To generate compelling returns in public equities, we believe a long-term approach is required,” said Alister Hibbert, Head of BlackRock's Strategic Equity Team and Fundamental Equity Alpha Manager Hall of Fame. “True business value is unlocked over years, not quarters; and companies that can deliver high returns over time are often undervalued by the market today. A high-conviction strategy like BELT is essential to helping investors capture this significant alpha opportunity.”

Managed by Alister Hibbert and Michael Constantis, BELT benefits from the global expertise of BlackRock’s $238 billion Fundamental Equities platform.⁵ The portfolio managers also run the BlackRock Unconstrained Equity Fund.

BlackRock High Yield ETF (BRHY)

Managed by David Delbos and Mitchell Garfin, BRHY has the same investment objective, benchmark, and portfolio managers as the BlackRock High Yield Fund. The Fund aims to maximize total return by investing primarily in non-investment grade bonds with maturities of 10 years or less. BRHY leverages the scale of BlackRock’s $2.8 trillion Fixed Income platform, providing clients with unparalleled market access.⁶

“A nimble investment approach is essential to navigating today’s shifting credit conditions,” said David Delbos, Co-Head of U.S. Leveraged Finance at BlackRock. “By delivering alpha opportunities through the ETF wrapper, we aim to capture the upside in rallying markets while protecting assets when high yield markets decline.”

About BlackRock
BlackRock’s purpose is to help more and more people experience financial well-being. As a fiduciary to investors and a leading provider of financial technology, we help millions of people build savings that serve them throughout their lives by making investing easier and more affordable. For additional information on BlackRock, please visit www.blackrock.com/corporate.

Carefully consider the Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses or, if available, the summary prospectuses which may be obtained by visiting www.iShares.com or www.blackrock.com. Read the prospectus carefully before investing.

Investing involves risk, including possible loss of principal.

Alpha is a measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha.

Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Non-investment-grade debt securities (high-yield/junk bonds) may be subject to greater market fluctuations, risk of default or loss of income and principal than higher-rated securities.

Actively managed funds do not seek to replicate the performance of a specified index. Actively managed funds may have higher portfolio turnover than index funds. Buying and selling shares of ETFs may result in brokerage commissions.

This information should not be relied upon as research, investment advice, or a recommendation regarding any products, strategies, or any security in particular. This material is strictly for illustrative, educational, or informational purposes and is subject to change. This material does not constitute any specific legal, tax or accounting advice. Please consult with qualified professionals for this type of advice.

The BlackRock Funds are not sponsored, endorsed, issued, sold or promoted by Bloomberg or S&P Dow Jones Indices LLC. Neither of these companies make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with the companies listed above.

The iShares and BlackRock Funds are distributed by BlackRock Investments, LLC (together with its affiliates, “BlackRock”).

©2024 BlackRock, Inc. or its affiliates. All rights reserved. iSHARES and BLACKROCK are trademarks of BlackRock, Inc. or its affiliates. All other trademarks are those of their respective owners.

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¹ Source: Broadridge Global Market Intelligence as of Dec. 31, 2023. In 2023, Registered Investment Advisors in the U.S. had total net assets in active ETFs of $233.6 billion, or about 48% of the total industry net assets of active ETFs, the largest percentage out of any other group, including banks, broker-dealers, discount platforms, and wirehouses.
² BlackRock as of June 18, 2024
³ BlackRock Q1 2024 Earnings, as of March 31, 2024. Past performance is not indicative of future results. For more information, see page 2 of BlackRock’s Q1-24 Earnings Release.
⁴ BlackRock Q1 2024 Earnings, as of March 31, 2024.
⁵ BlackRock, as of March 2024
⁶ BlackRock, as of March 2024

View source version on businesswire.com: https://www.businesswire.com/news/home/20240618727079/en/

Media

Paige Hofman

Paige.hofman@blackrock.com

212-810-3368

Andreia Cheong-A-Shack

andreia.cheongashack@blackrock.com

646-634-5568

Source: BlackRock

FAQ

What are the new BlackRock ETFs launched in October 2023?

BlackRock launched the BlackRock Long-Term U.S. Equity ETF (BELT) and the BlackRock High Yield ETF (BRHY).

What is the investment focus of the BlackRock Long-Term U.S. Equity ETF (BELT)?

The BlackRock Long-Term U.S. Equity ETF (BELT) focuses on long-term growth by investing in a concentrated portfolio of U.S. equities.

What type of bonds does the BlackRock High Yield ETF (BRHY) invest in?

The BlackRock High Yield ETF (BRHY) invests primarily in non-investment grade bonds with maturities of 10 years or less.

How much does BlackRock manage in active ETF assets in the U.S.?

BlackRock manages $25 billion in active ETF assets across 40 ETFs in the U.S.

How has the performance of BlackRock’s actively managed taxable fixed income AUM compared to benchmarks?

93% of BlackRock’s actively managed taxable fixed income AUM outperformed benchmarks over the last five years.

What has been the inflow trend for BlackRock's active ETFs globally?

BlackRock reported $15 billion in active net inflows globally in the first quarter of 2024 and has seen positive active flows for 17 of the past 21 quarters since 2019.