iShares, the world’s largest manager of exchanged traded funds and a business arm of New York-based BlackRock Inc, recently launched four iShareBonds Corporate ex-Financials Term ETFs. The new products are designed to offer you bond-like features such as a range of defined maturities while offering the benefits of ETF diversification and liquidity.
The ETFs provide you access to a diversified pool of non-financial, investment-grade and US dollar denominated corporate credit from both US and non-US issuers with at least in $250 million in outstanding face value and maturing in 2016, 2018, 2020 and 2023, respectively.
You may find the strategy interesting as are institutional clients, particularly commercial banks and private investors who are building a portfolio for retirement. The ETFs track the Barclays US Corporate Index with maturity dates between 2016 and 2023. I have highlighted the features of the funds below.
The iSharesBond 2016 Corporate ex-Financials Term ETF (IBCB) follows the Barclays 2016 Maturity High Quality Corporate Index and has an effective duration of 2.5 years with an average yield-to-maturity of about 0.75 percent. The fund holds 72 bonds in its portfolio with no single issuer contributing more than 3.5 percent. Majority of the bonds are tilted towards the low ‘A’ credit rating though there are some assets in the AAA and BBB- levels as well.
The iSharesBond 2018 Corporate ex-Financials Term ETF (IBCC) tracks the Barclays 2018 Maturity High Quality Corporate Index with an average yield-to-maturity of 1.24 percent. The effective duration of this fund is 4.17 years. The fund holds 83 bonds in its portfolio with the majority rated between AA- and A-.
The iSharesBond 2020 Corporate ex-Financials Term ETF (IBCD) follows the Barclays 2020 Maturity High Quality Corporate Index that has an effective duration of 5.47 years and an average yield-to-maturity of 1.98 percent. Like its earlier counterparts, credit quality of IBCD is also focused on the ‘A’ range while the fund holds 62 bonds in its basket. Launched on April 19, the fund has already raked up more than $34 million in assets.
Finally, the iSharesBond 2023 Corporate ex-Financials Term ETF (IBCE) tracks the Barclays 2023 Maturity High Quality Corporate Index. The underlying benchmark has an effective duration of 8.15 years while average yield-to-maturity is calculated at 2.62 percent. The fund is well diversified with 88 bonds in its basket, while credit quality is skewed towards the lower ‘A’ range.
All the funds have an annual expense ratio of 0.10 percent. They have just come recently into existence and have no history, so I will revisit this offering at some point in the future.
Disclosure: No holdings