BlackRock launches first mortgage-backed securities ETF

BlackRock’s iShares has launched an exchange-traded fund that invests in US mortgage-backed securities (MBS), saying it is the first product of this type in Europe.

The iShares US Mortgage Backed Securities ETF will purchase MBS featured on the Barclays US MBS index. It has a total expense ratio of 0.28%.

An MBS is an asset-backed security that is secured by a collection of mortgages, which are packaged together into a security that investors can then purchase.

MBS have long been controversial, and out of favour with investors. They are widely blamed for precipitating the 2008-09 financial crisis. However, a spokesperson for the firm said the ETF would only buy triple-A rated securities, guaranteed by the US government via the associations Fannie Mae and Freddie Mac, not pools of sub-prime mortgages.

The launch of the ETF comes as much of the highest rated government debt in Europe approaches negative return territory.

“Mortgage-backed securities have the potential to offer higher yields than bonds of similarly high credit quality,” said Brett Olson, regional head of iShares fixed income. “This fund could be an option for investors looking to gain exposure to the US housing market in addition to corporate balance sheets.”

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