BlackRock Asset Management Canada Limited (iShares)

BlackRock Asset Management Canada Limited (iShares)

January 26, 2015 07:00 ET

BlackRock Canada Launches the iShares Short Term Strategic Fixed Income ETF (XSI), Designed to Minimize Interest Rate Volatility While Maximizing Yield

TORONTO, ONTARIO--(Marketwired - Jan. 26, 2015) - (TSX:XSI) - iShares, the industry-leading exchange traded fund (ETF) business at BlackRock Asset Management Canada Limited (BlackRock Canada), an indirect, wholly-owned subsidiary of BlackRock, Inc. (BlackRock), announced the launch of a new iShares fund that seeks to generate income for unitholders by investing primarily in securities of one or more iShares ETFs that provide exposure to global fixed income securities, including government bonds, investment grade corporate bonds, high yield securities, emerging market debt and other types of fixed income investments. Exposure to these types of fixed income investments may also be obtained by investing directly in them and/or through the use of derivatives.In constructing the portfolio of iShares Short Term Strategic Fixed Income ETF (XSI), BlackRock Canada intends to limit its exposure to interest rate risk by limiting average portfolio duration to five years or less. XSI has an annual management fee of 0.50%. XSI has now closed the initial offering of its units which will be available for trading on the TSX when the market opens today.

"With investors facing historically low yields and long duration in the broad Canadian bond universe - XSI brings to market BlackRock's global capabilities to provide a fixed income solution that controls both overall risk and specifically volatility in interest rates, yet meeting the income needs of investors," said Pat Chiefalo, Managing Director, Head of Product for BlackRock Canada's iShares business. "As a multi-ETF vehicle, XSI brings the best of BlackRock's global iShares platform to Canadian investors to help them in their search for yield."

Rethink Your Bonds: Mitigating Interest Rate Risk in a Divergent Fixed Income World

XSI has been designed in response to the evolving landscape facing fixed income investors today. For several years, central banks around the world have kept fixed income yields low, but the average duration of bonds - the time it takes for the price of a bond to be repaid - has risen, driven by governments that have lengthened the maturity date of their debt instruments in order to lock in low interest rates. The result is that the spread between yield and duration is at historic highs: the average duration of the broad Canadian bond universe stands over seven years, while average yields are in the 2 to 3% range. If interest rates rise, returns from these long-duration bonds will be reduced.

Meanwhile, on the global level, investors are beginning to see interest rate policy divergence among central bankers after years of moving in lockstep. For example, while the U.S. is widely expected to tighten monetary policy, Europe, Japan and Canada are adopting a more accommodative stance. Such divergence in interest rates may create both opportunities and volatility in the fixed income market - pointing to the advisability of mitigating interest rate sensitivity while looking beyond Canada's borders for yield.

"The era of stability in monetary policy and interest rates is drawing to a close, and in this new environment it makes sense for investors to consider fixed income assets with shorter durations while global forces play themselves out," said Aubrey Basdeo, Managing Director, Head of Canadian Fixed Income, BlackRock. "At the same time, yields in traditional domestic bond portfolios look poised to remain low, suggesting that investors may need to explore fixed income opportunities elsewhere to generate yield."

Structured as a "fund of funds", XSI leverages BlackRock's global iShares platform. XSI directly holds funds that provide exposure to both domestic and international iShares bond funds that Canadian investors might otherwise have difficulty accessing. The diversification capabilities of XSI allows for rebalancing of exposures as the fixed income landscape fluctuates, in order to continue to minimize interest rate sensitivity (as well as country-specific risk) and maximize opportunities for greater yield.

Further information on the iShares Funds can be found at www.blackrock.com/ca.

About BlackRock

BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At December 31, 2014, BlackRock's AUM was $4.652 trillion. BlackRock helps clients meet their goals and overcome challenges with a range of products that include separate accounts, mutual funds, iShares® (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of December 31, 2014, the firm had approximately 12,200 employees in more than 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company's website at www.blackrock.com/ca - Twitter: @BlackRockCA - Blog: www.blackrockblog.com/can

About iShares

iShares is a global leader in exchange-traded funds (ETFs), with more than a decade of expertise and commitment to individual and institutional investors of all sizes. With over 700 funds globally across multiple asset classes and strategies and more than $1 trillion in assets under management as of December 31, 2014, iShares helps clients around the world build the core of their portfolios, meet specific investment goals and implement market views. iShares funds are powered by the expert portfolio and risk management of BlackRock, trusted to manage more money than any other investment firm.

iShares® Funds are managed by BlackRock Asset Management Canada Limited.

Commissions, management fees and expenses all may be associated with investing in iShares Funds. Please read the relevant prospectus before investing. Fund securities are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. The fund is not guaranteed, its values change frequently and past performance may not be repeated. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional.

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