Fixed-income investors seeking more targeted exposure to the corporate bonds markets now have more options to choose from as BlackRock's iShares exchange traded fund division rounded out its suite of corporate credit quality offerings Thursday.
The newly launched iShares Baa - Ba Rated Corporate Bond Fund (QLTB) and the iShares B - Ca Rated Corporate Bond Fund (QLTC) will complement the iShares Aaa - A Rated Corporate Fund (NYSEARCA:QLTA), which was launched in February.
QLTA follows upper medium to high grade corporate debt, with most of its holdings in the A+/A1 to A-/A3 range. Top sector allocations include 52.3% in industrials and 37.9% in financials. The fund has an average maturity of 9.16 years and an average coupon of 4.66%. The ETF has a 30-day SEC yield of 2.66% and an expense ratio of 0.15%.
QLTB holds lower-medium to non-investment grade, or speculative, corporate bonds, with most of its holdings in BBB+/Baa1 and BBB/ Baa2 credit ratings. Top sector allocations include communications 18.9%, consumer non cyclical 13.1%, energy 10.5%, basic industry 10.4%, and consumer cyclical 9.1%. The fund has an average maturity of 10.61 years and an average coupon of 6.25%. QLTB has an expense ratio of 0.30%.
QLTC tracks highly speculative, high-yield or "junk" status bonds, with the majority of holdings in the B+/B1 to B-/B3 range. Top sector allocations include, communications 21.3%, consumer non cyclical 14.4%, consumer cyclical 12.7%, technology 19.4% and energy 8.9%. The fund has an average maturity of 6.58 years and an average coupon of 8.57%. QLTC has an expense ratio of 0.55%.
"The new iShares suite transforms how investors can access specific slices of corporate bonds and brings transparent pricing to an otherwise opaque area of fixed income," Matthew Tucker, Head of iShares Fixed Income Investment Strategy at BlackRock, said in a press release.
"The new suite of three iShares corporate bond ETFs supports a highly flexible and uniquely modular portfolio management approach to the corporate credit spectrum. Now investors have the ability to tactically tilt fixed income strategies as needed to overweight or underweight portions of the corporate credit spectrum based on quality and yield," Tucker added.
In comparison, the iShares iBoxx $ Investment Grade Corporate Bond Fund (NYSEARCA:LQD) mainly holds corporate debt with credit ratings between A+/A1 to BBB/Baa2, including an average maturity of 11.96 years and an average coupon of 5.33%. LQD has an expense ratio of 0.15% and a 30-day SEC yield of 3.49%.
The iShares iBoxx $ High Yield Corporate Bond Fund (NYSEARCA:HYG) largely focuses on BB+/Ba1 to B-/B3 corporate bonds, with an average maturity of 5.11 years and an average coupon of 8.06%. HYG has an expense ratio of 0.50% and a 30-day SEC yield of 6.62%.
Max Chen contributed to this article.
Disclosure: I am long LQD. Tom Lydon's clients own LQD.