Steve Laipply, BlackRock iShares

Steve Laipply runs the iShares Fixed Income ETF business at BlackRock, overseeing roughly a trillion dollars in bond ETF assets. His path into the category was almost an accident. He was an investor in his personal account, tried to buy a single two-year Treasury note, found the process broken, and a colleague told him to just buy a bond ETF instead. He joined BGI (the iShares predecessor) shortly after, and the bond ETF category went from a sleepy corner of the market to the price-setting layer for fixed income.

The Bond ETF Category Almost Didn't Exist

Bond ETFs were not an obvious idea when iShares launched them in 2002. Equity ETFs had existed for nearly a decade by then. The skepticism inside the industry was structural. The OTC bond market did not trade like equities, dealer inventory had collapsed after the financial crisis, and the consensus position was that an exchange-traded vehicle could not function reliably on top of an inventory-driven, opaque underlying. iShares built it anyway. Two decades later, bond ETFs are routinely the price discovery vehicle the underlying market converges toward.

What BTOT Captures That the Agg Doesn't

The case for BTOT is the structural gap inside the Bloomberg Aggregate. The Agg is the benchmark every fixed income desk anchors to, but it intentionally leaves out chunks of the market that have grown materially over the last two decades. High yield, Treasury inflation-protected securities, securitized credit, and other slices sit outside the Agg by index rules, not by economic significance. BTOT was built to capture the total investable US bond market in a single wrapper, including the parts the Agg misses, with the duration and credit profile of the full market rather than a curated subset.

Duration Extension When Money Markets Still Pay

The harder question Steve gets from advisors right now is duration. Money market funds and Treasury bills still yield in the high threes. The implied question is, why move out the curve at all? Steve's answer is grounded in math, not a market call. The convexity of an intermediate-duration portfolio works for you when the curve eventually normalizes, and waiting for the first rate cut is waiting too long because the bond market will have already priced in the path. He frames it as a curve-positioning decision about where you want to be sitting when reinvestment risk inside the front end starts to matter, not a timing trade.

Bond ETF Prices as Leading Indicators

Steve's most interesting research is on price discovery during stress. In March 2020, the OTC bond market effectively froze. Dealers pulled inventory, quotes widened to the point of being meaningless, and many bond funds had to mark to model rather than mark to market. Bond ETFs like LQD kept trading on exchange the entire time. The post-event analysis showed that LQD's intraday price was the more accurate signal during the dislocation, and the OTC market converged toward the ETF rather than the other way around. That inverts how the industry has historically thought about price discovery in fixed income, and it changes the standing of bond ETFs inside institutional portfolios.

BTOT and BINC as a Pair

BlackRock's positioning is that BTOT is the beta anchor and BINC, the active fixed income fund Rick Rieder runs, is the alpha sleeve. The pair is designed to sit together rather than compete. BTOT gives full market exposure cleanly and at index cost. BINC tilts and overweights inside the same opportunity set with security selection. The pitch to advisors and allocators is that you don't have to choose between passive bond exposure and active fixed income. You can hold both and let each do what it's built for.

Individual Bonds vs. ETFs

Steve addresses the individual bond vs. ETF debate directly. Holding individual bonds gives you a defined maturity and a known cash flow, which is real, but it also concentrates idiosyncratic credit risk, requires meaningful capital to diversify, and exposes the investor to dealer markups that the ETF wrapper compresses through creation and redemption. For most allocators, the ETF gives better diversification per dollar, tighter execution, and intraday liquidity. For investors with specific maturity needs, individual bonds still have a role, but the case for them is narrower than it used to be.

Key Takeaways

• BTOT captures the total investable US bond market in one wrapper, including the slices the Bloomberg Aggregate excludes by index rules rather than by economic significance.
• The duration extension call into intermediate bonds is a curve-positioning decision, not a market call on when rate cuts start.
• In March 2020, bond ETFs like LQD were more accurate price discovery vehicles than the underlying OTC market, and the underlying converged toward the ETF.
• BTOT and BINC are built to pair as a beta anchor plus active alpha sleeve, not as a choose-one decision for fixed income allocators.
• The individual bond vs. ETF case has narrowed materially over two decades of category growth, with the ETF winning on diversification per dollar, execution, and liquidity for most use cases.

Listen to the Full Episode

This article is based on an episode of Behind the Ticker, hosted by Brad Roth, Founder and CIO of THOR Financial Technologies. For the full conversation with Steve Laipply on BTOT, the structural gaps in the Bloomberg Aggregate, bond ETF price discovery during stress, and how BTOT pairs with BINC, listen on Spotify, Apple Podcasts, or watch on YouTube.