BlackRock files to offer actively managed floating-rate loan ETF

About eight years after BlackRock CEO Larry Fink was quoted as saying the firm would "not do a bank loan ETF," a filing with the Securities and Exchange Commission indicates it's getting ready to launch one.

BlackRock, the world's largest asset manager, plans to offer the BlackRock Floating Rate Loan ETF, according to a July 15 filing with the SEC. The fund is expected to typically invest at least 80% of its assets in floating-rate loans and investments that are the economic equivalent of such loans, the filing said.

Included among the things in which the fund might potentially invest are senior secured floating-rate loans or debt as well as second lien or other subordinated or unsecured floating-rate loans or debt, the filing said.

"Given BlackRock's scale, they could competitively price this relative to SRLN," said Todd Rosenbluth, head of research at VettaFi, a data and analytics provider, referring to State Street Global Advisors' SPDR Blackstone Senior Loan ETF by its ticker symbol.

With assets totaling $8.1 billion, the SPDR Blackstone Senior Loan ETF ranked as the biggest bank loan ETF in VettaFi's database as of Monday. The fund, launched in 2013, has a 0.7% gross expense ratio, according to SSGA's website.

The filing for the planned BlackRock ETF did not show an expense ratio.

In an April report, Mr. Rosenbluth predicted that BlackRock was setting the stage to launch an active senior loan ETF of its own. He cited a BlackRock report titled "An evolution of the U.S. floating-rate bank loan market," which referenced ETFs.

The report was authored by BlackRock's James E. Keenan, chief investment officer and global co-head of credit, and Carly Wilson, portfolio manager for bank loans and global long/short credit strategies. Ms. Wilson is one of three portfolio managers listed in the filing for the BlackRock Floating Rate Loan ETF.

By year-end 2021, the size of U.S. bank loan market had grown to $1.3 trillion, nearly as large as the $1.6 trillion U.S. high-yield bond market, BlackRock's report said. Annual secondary trading volume of bank loans grew by about one-third over the past five years and reached a record $780 billion in 2021, the report said.

"We believe that higher turnover of bank loans affords CLO, mutual fund, CEF and ETF managers more opportunities to move in and out of positions efficiently," BlackRock's report said, using acronyms for collateralized loan obligation and closed-end fund.

That the BlackRock report cited improved bank loan market liquidity was significant given comments made in 2014 by BlackRock executives, including Mr. Fink, Mr. Rosenbluth said in an earlier interview. One 2014 news story quoted Mr. Fink as saying BlackRock "will not do a bank loan ETF," because BlackRock believes "that the underlying asset is far less liquid than daily liquidity of an ETF."

A spokesman for BlackRock declined to comment regarding the filing, citing "regulatory reasons."

BlackRock had $8.49 trillion in assets under management as of June 30.