BGI Launches Mortgage-Backed ETF

March 16, 2007 ( - Barclays Global Investors (BGI) has announced that the iShares Lehman MBS Fixed-Rate Bond Fund has begun trading on the American Stock Exchange, extending the choices ETF investors have with fixed-income asset classes.

The underlying index is market capitalization weighted and measures the performance of investment grade fixed-rate mortgage-backed pass-through securities of the Government National Mortgage Association (GNMA), Federal National Mortgage Association (FNMA), and Federal Home Loan Mortgage Corporation (FHLMC).  

This expands the fixed income iShares family to a total of 15 funds.

The underlying index includes securities issued by GNMA, FHLMC, and FNMA that have 30-, 20-, 15-year and balloon securities that have a remaining maturity of at least one year and have more than $250 million or more of outstanding face value. In addition, the securities must be denominated in U.S. dollars and must be fixed-rate and non-convertible. As of February 1, 2007, there were 387 issues included in the underlying index. The fund uses a representative sampling strategy in seeking to track the underlying index.

The new fund’s annual expense ratio is 0.25%.  

The iShares Funds are index funds that 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, according to a press release.