- BlackRock’s iShares Trust has filed paperwork with the U.S. Securities Exchange Commission to launch an exchange traded fund called the iShares BBB Rated Corporate Bond ETF. The fund will seek to track the investment results of an index composed of BBB or equivalent fixed-rate dollar-denominated bonds issued by U.S. and non-U.S. corporate issuers.
- The index the fund will track is the Markit iBoxx USD Liquid Investment Grade Index, which is designed to provide a balanced representation of the U.S dollar investment-grade corporate market.
- The index offers exposure to investment-grade corporate bonds and is rebalanced on a monthly basis. Only bonds from large issuers with at least $1B in aggregate outstanding issuance and $500M face value per bond are included in the index.
- Unlike the popular iShares LQD ETF which holds notes ranging from AAA down to BB rated. This exchange traded fund will only offer exposure to the lower rated BBB bonds.
- With regards to this ETF, BlackRock Fund Advisors will use a passive indexing approach to try and achieve the fund’s investment objective. Unlike many investments, the ETF does not try to “beat” the index it tracks and does not seek temporary defensive positions when markets decline or appear overvalued.
- This approach will help eliminate the chance that the fund will substantially outperform the underlying index but also may reduce some of the risks of active management, such as poor security and it can achieve lower costs and better after-tax performance by aiming to keep portfolio turnover low in comparison to actively managed investment companies.
- Investors that might be interested in learning more about corporate bond-based ETFs may also be interested in checking out PIMCO Investment Grade Corporate Bond Index ETF (NYSEARCA:CORP), Vanguard Total Corporate Bond ETF (NASDAQ:VTC), iShares Broad USD Investment Grade Corporate Bond ETF (NASDAQ:USIG) and SPDR Series Trust - SPDR Portfolio Corporate Bond ETF (NYSEARCA:SPBO).