BlackRock set to launch first active income-focused ETF

After introducing its first active ETF to the Australian market earlier this year, BlackRock is now preparing to launch its first actively managed, income-focused ETF by the end of November.

The ETF provider has confirmed its intention to launch the iShares Credit Income Active ETF (ICME), with listing on the ASX expected in late November.

With a suite of more than 50 passive exchange-traded funds (ETF) in Australia, the new launch marks the firm’s continued expansion into active ETFs following its debut of the iShares US Factor Rotation Active ETF (IACT) earlier this year.

According to BlackRock, ICME offers a “monthly income solution” that seeks to deliver returns above the RBA cash rate, with annual fees of 0.29 per cent. It is designed as a core fixed income holding that can also complement higher-risk credit and fixed strategies.  

The investment vehicle will focus on Australian investment-grade issuers across sectors, including subordinated (Tier 2) and senior credit, with the ability to add select securitised exposures for diversification.

It will trade daily on the ASX, combining active management with ETF accessibility.

Managed by Navin Saigal, Craig Vardy, and Cameron Garlik, the Sydney-based portfolio management team averages 25 years of experience. They will draw on BlackRock’s global fixed income expertise, bottom-up research, and Aladdin risk management technology to navigate credit markets.

Commenting on the launch, head of fixed income and credit product strategy at the firm’s Australia arm, Katherine Palmer, noted that after years of ultra-low rates, yields have reset higher, prompting investors to seek straightforward income solutions.

“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 domestic credit market continues to deepen and broaden, she added that more issuers are opting for local issuance rather than offshore, creating a diverse set of opportunities for investor portfolios.

Meanwhile, BlackRock’s head of global product solutions, Australasia, Steve Ead, highlighted how active ETFs are continuing to gain traction, particularly in the fixed income space.

“Active ETFs are reshaping how investors access fixed income. With the launch of IACT earlier this year and now ICME, we’re expanding access to BlackRock’s active investment expertise in Australia while delivering the transparency and efficiency iShares is known for,” Ead said.

He noted that despite bond ETFs growing to around US$2.7 trillion globally, they still only account for around 2 per cent of the approximately US$140 trillion bond market.  

“[This underscores] the opportunity ahead. ICME combines active management with iShares’ scale and innovation to help meet evolving investor needs.”

His comments echo earlier observations from Janus Henderson’s head of fixed interest, Jay Sivapalan, who identified a surge in fixed income ETFs in the Australian market owing to the accessibility and convenience of the ETF wrapper.

BlackRock is among several ETF providers, including Schroders, PIMCO, JP Morgan Asset Management, and Perpetual, that have launched actively managed funds this year, many of which have attributed the launch of these products to increased demand from financial advisers.  

Yet, as Money Management recently reported, even amid a wave of active ETF launches this year, a recent Morningstar analysis found that passive funds are still drawing greater inflows - mostly driven by their lower fees.