Wednesday, September 25, 2013 11:04 p.m. CDT

A BlackRock building is seen in New York June 12, 2009. REUTERS/Eric Thayer

By Ashley Lau

NEW YORK (Reuters) — BlackRock Inc. the largest provider of exchange-traded funds through its iShares business, is set to launch a new actively managed ETF focused on short-maturity bonds that will begin trading Thursday.

The introduction of the iShares Short Maturity Bond ETF, which will trade under the ticker NEAR on the BATS Exchange, comes at a time when BlackRock and other ETF providers say concerns about rising interest rates have driven investor interest toward more short-term fixed-income securities.

Rising rates cause bond prices to fall, and the longer the maturity of the bond, the sharper the fall.

I think we will continue to see investors repositioning toward short duration in anticipating of rising rates, iShares’ head of fixed-income strategy, Matt Tucker, said in an interview. Financial markets expect the Federal Reserve will reduce its bond-buying program, which is designed to hold down long-term interest rates, in the months to come.

Duration is a measure of the sensitivity of the price of a bond to a change in interest rates. A bond with a shorter duration is typically less volatile when rates rise than long-term bond funds.

Year to date, investors have put roughly $31.6 billion into short-term exchange-traded bond funds, according to BlackRock.

The new iShares ETF includes a range of U.S. dollar-denominated short-term fixed-income securities with an average duration of one year or less. At least 80 percent of the fund will be comprised of investment-grade assets, which include U.S. debt and corporate debt.

We see this one-year duration being a nice in-between to other existing funds, Tucker said.

It’s a part of the market where there are actually not a lot of offerings for investors, he said. It represents an interesting sweet spot for some investors who want to take on some risk but maybe not as much as even a two- or three-year duration fund might offer.

BlackRock currently has $55 billion in its active short-duration business, which includes a range of private and public funds.

This is a way for us to extend that lineup and basically offer an ETF that gives exposure to the short-duration part of the market, Tucker said.

BlackRock, the world’s largest money manager, bought iShares from Barclays in 2009. BlackRock had nearly $3.9 trillion in assets under management at the end of June.

(Reporting by Ashley Lau; Editing by Leslie Adler)