iShares Expands its Factor ETF Offering
Suite of Products Developed in Partnership with Registered Investment Advisors (RIAs) and Institutional Investors
18 April 2013, New York – BlackRock, Inc. (NYSE: BLK) announced today that its iShares Exchange Traded Funds (ETFs) business, the world’s largest manager of ETFs, has expanded its factor ETF product line-up with the launch of two sets of products: the iShares Enhanced ETFs, which are managed using BlackRock research rather than tracking an index, and the iShares MSCI Factor ETFs, which seek to track MSCI Risk Premia Indices. These products were designed in partnership with Registered Investment Advisors (RIAs) and institutional investors, specifically public pensions, to provide a broader range of solutions to help manage equity exposures and risk.
Factors are a set of investment characteristics which explain the risk and return behavior of an asset or stock. Every asset has a unique set of factor exposures -- such as quality, value, size and momentum -- that influence the asset’s return. Factor investing is a well-documented, differentiated approach to traditional market-capitalization investing. iShares currently offers a suite of products that look at minimum volatility as a factor to provide broad, diversified market exposure with potential reduced volatility
iShares Enhanced ETFs
iShares Enhanced ETFs were developed in close collaboration with RIAs who want access to multiple factors – quality, value and size – packaged in an iShares ETF. The new funds utilize the pioneering research on factor investing and expertise in risk management of BlackRock rather than tracking an index or individual stock picking. The iShares Enhanced ETFs seek to provide competitive risk-adjusted returns compared to the broad large-cap or small-cap market.
iShares MSCI Factor ETFs
The iShares MSCI Factor ETFs were designed at the request of institutional investors, such as Arizona State Retirement System (ASRS), who want exposure to a specific individual factor -- value, size or momentum – so they can overweight or hedge a single factor that has historically explained a significant part of companies' return and risk over the long-term1. MSCI is also a predominant choice for institutional investors.
ASRS saw that a carefully designed portfolio of risk premia strategies can be a valuable method of controlling factor risk and a viable diversifier. The collaborative partnership of ASRS, BlackRock and MSCI was instrumental in developing the iShares MSCI Factor ETFs which institutional investors can use to implement risk factor investing more precisely.
Patrick Dunne, Head of iShares Global Markets and Investments, concluded:
"The expansion of iShares Factor ETFs demonstrates how iShares has raised the bar of ETF development by working alongside clients. Increasingly we plan to develop products that are client-led to meet their most pressing portfolio challenges."
"The iShares MSCI Factor ETFs compliment iShares’ suite of Minimum Volatility products and the iShares Enhanced ETFs can benefit from BlackRock research, portfolio implementation, and risk management expertise for our clients."
"iShares is in the business of providing transparent, liquid market exposures to retail and institutional investors globally. While we continue to see tremendous demand from investors for index-based ETF products, there are situations where clients are seeking exposures that cannot be delivered by tracking a third-party index. Launching `active’ ETFs enables us to expand our product suite and meet this client demand."
BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At March 31, 2013, BlackRock’s AUM was $3.936 trillion. BlackRock offers products that span the risk spectrum to meet clients’ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including 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 March 31, 2013, the firm has approximately 10,600 employees in 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.
iShares is a global product leader in exchange traded funds with over 600 funds globally across equities, fixed income and commodities, which trade on 20 exchanges worldwide. The iShares Funds are bought and sold like common stocks on securities exchanges. The iShares Funds are attractive to many individual and institutional investors and financial intermediaries because of their relative low cost, tax efficiency and trading flexibility. Investors can purchase and sell shares through any brokerage firm, financial advisor, or online broker, and hold the funds in any type of brokerage account. The iShares customer base consists of the institutional segment of pension plans and fund managers, as well as the retail segment of financial advisors and high net worth individuals.
1Source: BlackRock, Global Return Premiums on Earnings Quality, Value and Size, January 7, 2013.
Carefully consider the iShares Funds' investment objectives, risk factors, and charges and expenses before investing. This and other information can be found in the Funds' prospectuses, which may be obtained by calling 1-800-iShares (1-800-474-2737) or by visiting www.iShares.com. Read the prospectus carefully before investing.
Investing involves risk, including possible loss of principal. Transactions in shares of the iShares Funds will result in brokerage commissions and will generate tax consequences. iShares Funds are obliged to distribute portfolio gains to shareholders. Shares of the iShares Funds may be sold throughout the day on the exchange through any brokerage account. However, shares may only be redeemed directly from a Fund by Authorized Participants, in very large creation/redemption units. There can be no assurance that an active trading market for shares of an ETF will develop or be maintained. Diversification may not protect against market risk or loss of principal.
Risks related to the iShares Enhanced ETFs: The Funds do not seek to replicate the performance of a specified index. The Funds may have a higher portfolio turnover than funds that seek to replicate the performance of an index. The Funds seek to provide exposure to U.S. large- and small-capitalization stocks that emphasize certain quantitative investment characteristics (“factors”), including, but not limited to, cash earnings, earnings variability, leverage, price-to-book ratio and market capitalization. There can be no assurance that exposure to such investment factors will enhance the Funds’ performance over time. It is expected that exposure to such investment factors will detract from performance in some market environments, perhaps for extended periods. In such circumstances, the Funds’ investment process will seek to maintain exposure to the targeted investment factors and will not adjust to target different factors. Investments in smaller companies may exhibit higher volatility.
Risks related to the iShares MSCI Factor ETFs: In addition to the normal risks associated with investing, narrowly focused investments may exhibit higher volatility. Stocks that previously exhibited high momentum may not experience continued positive momentum or may experience more volatility than the market as a whole. Value securities are those issued by companies that may be perceived as undervalued. Value securities may fail to appreciate for long periods of time and may never realize their full potential value. The value of the securities in the iShares MSCI USA Size ETF’s portfolio may fluctuate, sometimes rapidly and unpredictably. The value of a security may fluctuate due to factors affecting markets generally or particular industries. Securities in the Fund's portfolio may be subject to price volatility and the prices may not be any less volatile than the market as a whole and could be more volatile.
The minimum volatility fund(s) may experience more than minimum volatility as there is no guarantee that the underlying index's strategy of seeking to lower volatility will be successful.
The iShares Funds are distributed by BlackRock Investments, LLC (together with its affiliates, "BlackRock"). The iShares Funds are not sponsored, endorsed, issued, sold or promoted by MSCI, Inc., nor does this company make any representation regarding the advisability of investing in the Funds. BlackRock is not affiliated with the company listed above.
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