How active ETFs may help enhance portfolio performance

Updated: November 3, 2025

• Active ETFs are funds that are actively managed by professionals to target outcomes beyond the tracking of an index, such as outperforming an index, generating income, or accessing a broader universe — including asset classes that aren’t as accessible in traditional indices.
• BlackRock projects that global active ETF assets under management will triple to $4.2 trillion by 2030, from $1.4 trillion as of June 2025.¹
• The iShares Flexible Income Active ETF (BINC) is an example of an active ETF, and is managed by an experienced team led by Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income.

The iShares Flexible Income Active ETF (BINC) is an example of an active ETF that seeks to outperform an index,  also known as alpha-seeking. Launched in May 2023, BINC seeks to offer investors access to sectors of the fixed income  market that can be challenging to reach, including European credit, high yield, and securitized products.

The ETF is managed by an experienced team led by Rick Rieder, BlackRock’s Chief Investment Officer of Global Fixed Income and Head of the Global Allocation Investment Team. He serves on numerous management committees and is Chairman of the firm-wide BlackRock Investment Council. Over an investment career of more than 37 years, Rick Rieder has served as Vice Chairman and member of the Borrowing Committee for the U.S. Treasury and member of the Federal Reserve’s Investment Advisory Committee on Financial Markets.

His skilled management of several funds has resulted in being awarded the 2023 Outstanding Portfolio Manager by Morningstar⁷, the Global Unconstrained Fixed Income Manager of the Year for 2015 by Institutional Investor⁸, and he was inducted into the Fixed Income Analysts Society Fixed income Hall of Fame in 2013. Four of the five funds Rick Rieder manages — Strategic Income Opportunities Fund (BSIIX), Total Return Fund (MAHQX), Strategic Global Bond Fund (MAWIX), and Global Allocation Fund (MALOX) — have been awarded Gold Medals by Morningstar.⁹ (See figure 4)

Finally, Rick serves as Chairman and President of the Board of Education for North Star Academy's fourteen Charter Schools in Newark, New Jersey. He is a member of the board of Emory University, Emory's Goizueta Business School, and the University's Finance Committee, and is the Vice Chairman of the Investment Committee. He is founder and chairman of the Goizueta Business School's BBA investment fund and community financial literacy program, Graduation Generation Public School Collaboration in Atlanta. He is also on the Board of the BlackRock Foundation, the Board of Advisors for the Hospital for Special Surgery, and is a Member of the Ownership Group and Board of Advisors of the Baltimore Orioles.

BINC focuses on utilizing “plus” fixed income sectors, beyond the traditional, well-known “core” markets, to seek income and manage risk through different market environments, which can make it complementary to core strategies. “Core” refers to the traditional fixed income asset classes with the highest credit quality, such as U.S. Treasuries, U.S. agency mortgages, and U.S. investment grade corporate debt. Conversely, "plus" refers to fixed income asset classes outside of the "core" universe, such as U.S. high yield corporate debt, securitized products, and global debt.

The fund has the ability to invest across the full extent of global fixed income opportunities in an effort to create a portfolio that generates “plus” income with less volatility.

For many years, fixed income was used as a tool to pair with equities. Traditional indices of choice for this implementation, such as the Bloomberg Barclays US Aggregate Index, are often concentrated, with high interest rate risk and high volatility.¹³ In a 40-year bull market that saw the 10-year Treasury yield fall from over 15% to under 1%,¹⁴ this worked well-enough as persistently falling interest rates meant price appreciation for investors. Today, however, we find ourselves in a new regime as rates have broken out of their 40-year bull market. With Treasury yields higher and showing more two-way risk, duration, volatility, and correlation between stocks and bond¹⁵ representing potential downside risks — especially as the U.S. Government continues to issue more and more debt.

In this environment, we believe fixed income allocations may benefit from a focus on optimizing income while minimizing unnecessary volatility. In BINC, we believe in leveraging the 21st century portfolio construction tools such as regime identification¹⁶, stress testing, scenario analysis, and risk modeling to pursue this optimal balance of income and volatility.

BINC is, by definition, a “plus” sector product because it has a 20% limit on its combined exposure to traditional fixed income assets, U.S. Treasuries, agency mortgages, and U.S. investment grade debt.¹⁷ This limit is in place so that investors know they are receiving exposure to true “plus” fixed income sectors vs. traditional core bonds. In addition to the 20% limit on core bonds, BINC’s prospectus also mandates¹⁸ :

• A 15% limit on collateralized loan obligations (CLOs).
• A 15% limit on preferred securities.
• A 15% limit on bank loans.
• A duration between 1-5 years (learn more about duration, which is a measure of a bond’s price sensitivity to changes in interest rates.)

Within those confines, the fund seeks to target differentiated sources of yield and allocates across different sectors — all while managing both interest rate volatility and credit risk.

This is where the expertise of the fund’s managers, as well as BlackRock’s global footprint, comes into play. Using the full scope of the BlackRock Global fixed income platform, BINC combines top-down asset allocation decisions with bottoms-up security selection to channel both worlds towards one clear objective.

This multi-faceted active management style could be advantageous for BINC. There are nearly 70,000 distinct fixed income securities in the vast, nuanced fixed income universe. Thorough top-down regime identification and cross-asset analysis allow portfolio managers to look across the universe in an effort to identify an optimal combination of allocations to pursue the fund’s income objective most efficiently. This process involves myriad decisions that are made in parallel, including, but not limited to:

• Where on the yield curve to hold interest rate exposure, reflecting how comfortable the managers are with each maturity.
• Which tranche of credit is offering the greatest risk/return.
• How much exposure to have in each region.
• How much interest-rate risk to take.

From there, specialists in each asset class contribute their expertise to the security selection process — ensuring every security is expertly analyzed and intentionally selected.

In “plus” markets like European Credit or CLOs, having specialized research teams dedicated to finding the best opportunities are essential for generating durable alpha and managing risk within each asset class. Without having direct access to a robust and global platform of experts and proprietary data, like BlackRock’s, investors would have a very difficult time replicating the underlying strategy and process.

The dispersion within the high yield asset class today illustrates the importance of this active approach. In the current environment, U.S. high-yield triple-C rated securities face significant vulnerabilities as they grapple with the difficulties of refinancing in a high-rate environment; meanwhile, U.S. high-yield double-Bs have seen historically low defaults but spreads here are at historic tights¹⁹ — meaning compensation to investors for owning these bonds is lower than it has been for a long time. The situation in both these segments highlights the need for an elevated thoughtfulness on both total exposure and security selection — and this is just the U.S. high yield market.

Across the pond, European credit markets still offer higher spreads than the U.S. markets, which makes an allocation here compelling for both picking-up yield and diversification. However, slower economic growth in Europe creates an added risk for the lowest-quality lenders there. For this reason, our teams currently prefer to stay in the higher-quality segments of European high yield.

Altogether, one can easily see how active asset allocation and security selection is important when seeking the most optimal, efficient combination of credit quality, convexity, and income when looking across a universe of nearly 70,000 securities.

Most individuals — even many professionals — simply don’t have the time, resources, and expertise to construct and continually maintain a “plus” fixed income portfolio. That’s why BINC was launched and why we believe it can be a great complement to a traditional core bond allocation, which you can buy more or less of based on your risk appetite.

As illustrated in Figure 5, BINC has produced strong returns since inception with less volatility and lower peak-to-through drawdowns relative to funds that invest in either a broad universe of U.S. dollar-denominated bonds or high-yield corporate bonds.