Less than a month after launching the iShares Credit Income Active ETF (ICME), the fund accrued $100 million in assets under management, something the firm attributed to investors’ demand for income solutions.
In early November, BlackRock announced its intention to launch its first actively managed income-focused ETF, ICME, to provide investors with a monthly income solution that would deliver returns above the RBA cash rate with management fees of just 0.29 per cent.
The fund officially hit the ASX on 21 November and within less than a month it hit $100 million in assets under management (AUM), capitalising on the groundswell of interest in fixed income and low-cost ETF solutions.
This growing trend has been driven in part by the high market volatility seen last year, along with the need to rebalance portfolios after a rally in growth assets and the gradual phasing out of AT1 bank hybrids ahead of the 2027 deadline.
In October, Betashares monthly ETF report found that flows into cash and fixed income ETFs jumped 46 per cent to $1.79 billion, up from $1.22 billion in September, accounting for 30 per cent of the total monthly inflows.
Commenting ahead of the launch of ICME, head of fixed income and credit product strategy at the firm’s Australia arm, Katherine Palmer, said the fund came in response to investors seeking straightforward income solutions as yields reset higher after years of ultra-low rates during the COVID-19 pandemic.
“ICME is designed to help investors navigate the transition in the market with the phasing out of bank hybrid securities and those seeking an easy-to-understand higher-income product,” Palmer said.
As the market prepares to shift, a number of providers have jumped at the opportunity to launch products that could fill the void left by AT1s.
Betashares, for example, expanded its fixed income range in December with the launch of the Betashares Australian Enhanced Credit Income Complex ETF (ECRD), designed to offer income-focused investors an alternative to direct hybrids.
Speaking with Money Management last month, State Street Investment Management head of intermediary, Australia, Tim Bradbury said investors and advisers are already looking to shift assets away from AT1s, despite the full phase-out of these products still being five years away.
While highlighting the opportunity here for product providers, Bradbury said that State Street would also be looking to capitalise this in the new year, though the firm has already enacted changes to align with the trend.
“We took the chance in the middle of the year to refresh one of the key indexes we have, which makes that exposure largely 50/50 between Australian government bond and corporate bonds,” Bradbury said.
“So, we like the corporate bond exposure because it gives you a higher running yield and it does dampen down some of the drawdown impact, and we think that’s a trend that we’re seeing in the ETF market as well.”
