Is iShares Investment Grade Bond Factor ETF (IGEB) a Strong ETF Right Now?
The iShares Investment Grade Bond Factor ETF (IGEB) was launched on 07/11/2017, and is a smart beta exchange traded fund designed to offer broad exposure to the Investment Grade Corporate Bond ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
On the other hand, some investors who believe that it is possible to beat the market by superior stock selection opt to invest in another class of funds that track non-cap weighted strategies--popularly known as smart beta.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
This area offers many different investment choices, such as simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies; however, not all of these strategies can deliver superior results.
Fund Sponsor & Index
IGEB is managed by Blackrock, and this fund has amassed over $241.49 million, which makes it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. IGEB, before fees and expenses, seeks to match the performance of the BlackRock Investment Grade Enhanced Bond Index.
The BlackRock Investment Grade Enhanced Bond Index comprises of U.S. dollar-denominated, investment-grade corporate bonds.
Cost & Other Expenses
Cost is an important factor in selecting the right ETF, and cheaper funds can significantly outperform their more expensive cousins if all other fundamentals are the same.
Annual operating expenses for IGEB are 0.18%, which makes it on par with most peer products in the space.
It has a 12-month trailing dividend yield of 3.69%.
Sector Exposure and Top Holdings
Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.
When you look at individual holdings, Jpmorgan Chase & Co-2.74%-10-15-30 accounts for about 0.56% of the fund's total assets, followed by Jpmorgan Chase & Co-5.00%-12-31-49 and Bank Of America Corp-5.88%-12-31-49.
Its top 10 holdings account for approximately 5.32% of IGEB's total assets under management.
Performance and Risk
Year-to-date, the iShares Investment Grade Bond Factor ETF has gained about 3.06% so far, and is down about -5.13% over the last 12 months (as of 03/30/2023). IGEB has traded between $41.26 and $48.62 in this past 52-week period.
IGEB has a beta of 0.29 and standard deviation of 7.23% for the trailing three-year period. With about 413 holdings, it effectively diversifies company-specific risk.
IShares Investment Grade Bond Factor ETF is a reasonable option for investors seeking to outperform the Investment Grade Corporate Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
Vanguard Short-Term Corporate Bond ETF (VCSH) tracks Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index and the Vanguard Total International Bond ETF (BNDX) tracks Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index. Vanguard Short-Term Corporate Bond ETF has $40.59 billion in assets, Vanguard Total International Bond ETF has $48.08 billion. VCSH has an expense ratio of 0.04% and BNDX charges 0.07%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Investment Grade Corporate Bond ETFs.
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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iShares Investment Grade Bond Factor ETF (IGEB): ETF Research Reports
Vanguard Short-Term Corporate Bond ETF (VCSH): ETF Research Reports
Vanguard Total International Bond ETF (BNDX): ETF Research Reports
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