The iShares Lehman TIPS Bond Fund will track inflation-protected public obligations of the US Treasury, commonly known as “TIPS,” which are designed to provide inflation protection to investors. The index the fund is tracking, the Lehman Brothers US Treasury Inflation Notes Index measures the performance of the inflation-protected public obligations of the US Treasury. As of September 1, 2003, there were 11 issues included in the Index, according to a news release.
The inflation adjustment, which is typically applied monthly to the principal of the bond, follows a designated inflation index, the consumer price index (CPI). A fixed coupon rate is applied to the inflation-adjusted principal so that as inflation rises, both the principal value and the interest payments increase.
BGI’s newest ETF represents another Lehman tracking fund for the company. In September, the firm released the iShares US Aggregate Bond (See Barclays Releases New Bond ETF ).
The new iShares fund will be managed by Barclays Global Fund Advisors, a subsidiary of Barclays Global Investors, N.A., and has an expense ratio of 0.20%.
Fixed Income iShares are portfolios of bonds that can be bought and sold throughout the trading day like shares of stock, at prices determined by the market. Like traditional open-ended mutual funds, these bond-based ETFs allow investors to purchase a basket of bonds with one simple transaction. In addition, whereas mutual funds are required to disclose their holdings semi-annually, iShares holdings are available daily.
A list of currently available iShares is available at www.ishares.com .