BlackRock Inc. BLK, parent company of iShares, the world's largest issuer of exchange-traded funds, bolstered its fixed-income footprint Thursday with the debut of four new bond funds. Two of those new products are smart beta funds while the other pair focus on environmental, social and governance principles.
Two of the new ETFs, the iShares Edge High Yield Defensive Bond ETF HYDB and the iShares Edge Investment Grade Enhanced Bond ETF IGEB, track indexes developed in-house by BlackRock marking the first time the issuer has used its own benchmarks on its ETFs.
Inside The Smart Beta Funds
IGEB, the investment-grade corporate bond ETF, tracks the BlackRock Investment Grade Enhanced Bond Index and holds 222 bonds. That new ETF has an effective duration of 7.44 years and an average yield of almost 3.5 percent, according to issuer data. Nearly all of the new ETF's holdings are rated A or BBB.
HYDB, the high-yield member of the duo, follows the BlackRock High Yield Defensive Bond Index and holds 123 junk bonds. The effective duration on that new ETF is just over four years and the average yield is 5.7 percent. Over 82 percent of the new ETF's holdings are rated BB or B.
The New ESG ETFs
The new ESG bond funds from iShares are the iShares ESG 1-5 Year USD Corporate Bond ETF SUSB and the iShares ESG USD Corporate Bond ETF SUSC.
The iShares ESG USD Corporate Bond ETF tracks the Bloomberg Barclays MSCI US Corporate ESG Focus Index and holds 173 bonds. That ETF has an effective duration of 7.25 years and an average yield of almost 3.1 percent, according to issuer data.
The iShares ESG 1-5 Year USD Corporate Bond ETF follows the Bloomberg Barclays MSCI US Corporate 1-5 Year ESG Focus Index and holds 84 bonds. The ETF is a shorter-term fund with an effective duration of 2.73 years and an average yield of almost 2.2 percent. Nearly all of SUSC's holdings are rated AA, A or BBB.
Both of the new ESG ETFs charge 0.12 percent per year, or $12 on a $10,000 investment. HYDB charges 0.35 percent annually while the expense ratio on IGEB is 0.18 percet.
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