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Fixed-Income iShares Launched As Investors Flock
to Bond Funds
By John Spence, Associate
Editor
The first fixed-income exchange-traded funds began trading on the
American Stock Exchange today, bringing the total number of ETFs
listed on the AMEX to 121. The new funds, which are managed by San
Francisco-based Barclays Global Investors and have expense ratios
of 0.15%, are as follows:
- iShares Lehman 1-3 Year Treasury Bond Fund (SHY)
- iShares Lehman 7-10 Year Treasury Bond Fund (IEF)
- iShares Lehman 20+ Year Treasury Bond Fund (TLT)
- iShares Goldman Sachs $ InvesTop Corporate Bond Fund (LQD)
"iShares bond ETFs offer investors one of the best value propositions
among bond investments today," said Lee Kranefuss, CEO of BGI's
Individual Investor Business. "With the current market environment,
the bond iShares provide investors compelling benefits: diversification,
transparency in portfolio holdings, and intra-day pricing."
With stocks swooning and investors running for cover
in bonds, the launch of Barclays' bond ETFs seems timely indeed.
The S&P 500 is down 30.3% for the one-year period ending this
week, according to Standard & Poor's. A quick look at Morningstar's
database of domestic stock funds shows that every category, with
the exception of real estate, is in the red for the one-year period
as of yesterday. Fixed-income funds, on the other hand, have provided
a refuge from the stock market's carnage.
| Morningstar Fixed-Income Category |
YTD
|
1-year
|
3-year
|
5-year
|
| Long Government |
5.99%
|
7.97%
|
7.86%
|
6.86%
|
| Intermediate Government |
5.49%
|
8.29%
|
7.83%
|
6.58%
|
| Short Government |
3.99%
|
6.90%
|
6.68%
|
5.88%
|
| Long-Term Bond |
2.12%
|
4.31%
|
6.30%
|
5.62%
|
| Intermediate-Term Bond |
3.35%
|
5.91%
|
6.98%
|
6.07%
|
| Short-Term Bond |
2.64%
|
5.10%
|
6.45%
|
5.83%
|
Source: Morningstar Fund
Category Performance, 07/25/02. Returns are simple averages.
If recent mutual fund flows are any indication, the fixed-income
iShares may find popularity with investors right off the bat. According
to estimates from New York-based fund tracker Lipper, bond funds
attracted a record $18 billion in June as nervous investors fled
stock mutual funds. This figure breaks the previous record of $15
billion that bond funds took in during August 2001. On the other
hand, equity funds lost $14 billion in June due to outflows, which
represents the third-largest monthly exodus on record. Investors
pulled out $30 billion from stock funds in September 2001 in the
wake of the WTC terrorist attacks, and $15 billion in March 2001.
"We view today's launch as an important new asset class for
ETF investors," said BGI spokesman Tom Taggart in an interview.
"Bonds should be part of investors' portfolios in both bull
and bear markets, and those who understand the inherent advantages
of ETFs versus traditional mutual funds will find the fixed-income
iShares a welcome addition."
BGI has also filed to introduce three more fixed-income ETFs -
the iShares Lehman Treasury Bond Fund, iShares Lehman Government/Credit
Bond Fund, and the iShares Lehman Credit Bond Fund. Barclays said
the exact launch date of those funds has yet to be determined.
07/26/2002
References
"Harried invsetors flee stock funds." Craig Tolliver.
CBSMarketWatch.com article, July 22, 2002.
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