BlackRock launches Europe’s first active ETF on AT1 bonds
21 JAN, 2026
BlackRock announced the launch of the iShares AT1 Bond Active UCITS ETF (BAT1), the first actively managed ETF in Europe that allows innovative investment in Additional Tier 1 (AT1) bonds. The fund is designed for investors seeking attractive income and portfolio diversification, combining BlackRock's active management expertise with the scale of iShares, its ETF platform.
AT1s are fixed income instruments issued by banks to meet regulatory capital requirements. They are characterized by offering a potential coupon return that is often compared to that of high yield credit, and by historically having a low correlation with traditional fixed income. In the capital structure, these bonds are below senior debt and Tier 2 debt, and are designed to absorb losses in episodes of financial stress, which translates into a specific risk-return profile and, at the same time, possible diversification benefits. In addition, they provide exposure to a segment that is not normally included in standard benchmark indices.
Since its introduction in 2013, the AT1 market has grown strongly and currently exceeds $300 billion in live volume, supported —according to the manager— by a consolidated flow of issues from the main European banks.
BAT1 is listed on Borsa Italiana and Xetra, and has a TER of 0.50%.
AT1s have become a relevant piece of the fixed income landscape in Europe, with attractive income potential alongside diversification benefits. Our approach, intensive in analysis and guided by risk control, seeks to capture this income premium while maintaining a focus on alpha generation opportunities and capital preservation.
Jose Aguilar, main portfolio manager and responsible in EMEA for European high yield and long/short credit strategies, BlackRock
ETF Approach: Credit Quality and Operational Efficiency
BAT1 aims to offer attractive income levels by investing mainly in AT1 bonds issued by issuers of higher credit quality, typically "national champion" banks with investment grade rating. The ETF employs a creation and in-kind redemption mechanism, a feature that, according to the firm, helps to support liquidity and promotes efficient trading even in periods of volatility.
The structure also fits with the nature of these instruments: AT1s are issued by listed entities and have broad coverage and transparency in the market, factors that can contribute to narrowing trading spreads for the investor.
By combining active management with the efficiency of the ETF format, we open the door for investors to access a fixed income segment that has historically been difficult to reach. As demand grows for innovative fixed income solutions, BAT1 offers European investors more alternatives to build resilient portfolios.
Vasiliki Pachatouridi, Head of iShares Fixed Income Product Strategy in EMEA, BlackRock
