Fixed Income: U.S. - Broad Market Investment Grade

BNDC Top Performer Intra-day
Price $25.34
Today’s Change +0.11%(0.42)
2:59pm 10/20/2017
HQBD Bottom Performer Intra-day
Price $50.54
Today’s Change -0.34%(-0.67)
10:24am 10/20/2017
  • Overview
  • Efficiency
  • Tradability
  • Fit

ETF.com Insight

The US Investment Grade Broad Market Bond segment is home to two of the largest and most liquid funds around—AGG and BND—and the segment itself is one of the most popular fixedcore building blocks for fixed income exposure income segments. The segment has been deemed the core bond allocation which means many investors use ETFs in this segment as the core building blocks for their fixed income exposure. Funds in this segment provide market-value weighted exposure to Treasurys, MBS and credits.
Before the introduction of two rate-hedged strategies by WisdomTree, it was a rather boring segment with four large funds tracking essentially the same index, the Barclays Capital U.S. Aggregate Bond Index. All four vanilla funds in the segment cost less than 12 bps for a round-trip trade, so there is plenty of liquidity for retail investors with AGG and BND being the clear choices for active traders.
AGZD and AGND are the two new entrants of the segment. They offer different takes on the core bond market by tracking the same long Barclays index with interest rate hedge overlays. AGZD tries to mitigate interest rate risk with a net 0 duration target while AGND exposure investors to interest rate risk in the opposition direction with a net duration of -5 years.
Overall, AGG has demonstrated the most consistently tight tracking, competitive fees, ample liquidity, and comprehensive market-like exposure, earning it our Analyst Pick of the segment. (Insight updated 10/20/17)

All Funds (14)

AGG $51.06 B 51060605390 Most Liquid

A 97
E
98
98
T
91
91
F
97
97

SPAB $1.1 B 1096740705.4088 Efficient

A 97
E
96
96
T
84
84
F
97
97

SCHZ $4.31 B 4311878700 Very low expense ratio

A 97
E
97
97
T
89
89
F
97
97

BND $36.15 B 36148768404.38 Efficient & liquid

A 97
E
91
91
T
91
91
F
97
97

AGZD $24.09 M 24091450 Mitigate interest rate risk

C 51
E
81
81
T
53
53
F
51
51

HQBD $20.27 M 20267000 N/A

C 0
E
81
81
T
42
42
F
0
-1

AGND $17.31 M 17309600 Carry significant duration risk

D 55
E
76
76
T
49
49
F
55
55

BNDC $3.14 M 3144575.1564 N/A

D 0
E
77
77
T
27
27
F
0
-1

NUBD $40.1 M 40098080 N/A

F 0
E
50
50
T
0
-1
F
0
-1

AGGY $172.9 M 172898840 aggregate US

N/A 0
E
0
-1
T
0
-1
F
0
-1

AGGE $73.88 M 73875019.7 N/A

N/A 0
E
0
-1
T
0
-1
F
0
-1

NUAG $61.6 M 61601250 N/A

N/A 0
E
0
-1
T
0
-1
F
0
-1

BNDS $1.1 B 1095180889.5723 Efficient

A 97
E
96
96
T
84
84
F
97
97

LAG $1.07 B 1069868503.2 Efficient

A 98
E
97
97
T
86
86
F
98
98

ETF.com Grade as 10/12/17

Fixed Income: U.S. - Broad Market Investment Grade

Performance  [as of 10/19/17] 1 Month 3 Month YTD 1 Year 3 Years 5 Years 10 Years
Benchmark: Bloomberg Barclays U.S. Aggregate Bond Index-0.01%0.56%3.28%0.60%2.26%2.10%4.18%
A 96.946957AGG51060605390AGGiShares Core U.S. Aggregate Bond ETF--------------
A 96.863361SPAB1096740705.4088SPABSPDR Portfolio Aggregate Bond ETF--------------
A 96.726964SCHZ4311878700SCHZSchwab US Aggregate Bond ETF--------------
A 96.575409BND36148768404.38BNDVanguard Total Bond Market ETF--------------
C 51.158534AGZD24091450AGZDWisdomTree Barclays Interest Rate Hedged U.S. Aggregate Bond Fund--------------
C 0HQBD20267000HQBDHartford Quality Bond ETF--------------
D 54.519929AGND17309600AGNDWisdomTree Barclays Negative Duration U.S. Aggregate Bond Fund--------------
D 0BNDC3144575.1564BNDCFlexShares Core Select Bond Fund--------------
F 0NUBD40098080NUBDNuShares ESG U.S. Aggregate Bond ETF--------------
N/A 0AGGY172898840AGGYWisdomTree Barclays Yield Enhanced U.S. Aggregate Bond Fund--------------
N/A 0AGGE73875019.7AGGEIQ Enhanced Core Bond U.S. ETF--------------
N/A 0NUAG61601250NUAGNuShares Enhanced Yield U.S. Aggregate Bond ETF--------------
A 96.863361BNDS1095180889.5723BNDSSPDR Bloomberg Barclays Aggregate Bond ETF0.14%1.25%3.38%0.60%2.23%2.01%4.44%
A 98.36384415LAG1069868503.2LAGSPDR Barclays Aggregate Bond-0.15%0.67%1.09%2.13%1.71%2.93%--
All returns over 1 year are annualized. All returns are total returns unless otherwise stated.

ETF.com Efficiency Insight

Since all four vanilla funds in the segment track essentially the same index (the Barclays US Aggregate Index) fees and tracking performance are of paramount importance. Exception for LAG,All four vanilla funds are well-managed which charges 16.45 bps, the rest of vanilla funds charge less than 10 bps. Of the four, AGG edges out the competition by delivering consistently tight tracking: The fund has median tracking that is in line with its expense ratio with minimal volatility.
All four vanilla funds are well-managed, and each has enough assets to make closure unlikely. They all deliver the index very well. Structurally, our only small gripe is with BND, which reports holdings monthly with a lag, while the other three funds in the segment publish holdings daily. However, the fund’s solid tracking should alleviate investor’s concerns about what the fund holds on a daily basis.
AGZD and AGND are the two newest entrants of the segment. Both funds charge north of 20 bps, higher than vanilla funds. However, the fees seem reasonable in the context that they track two rate-hedged versions of the Barclays Agg index. So far, both funds struggle in tracking their underlying indexes, likely due to high degrees of portfolio optimization. AGZD’s growing asset base is enough to clear from closure risk. However, AGND continues to carry medium closure risk on the back of small asset base and thin trading volumes. (Insight updated 10/20/17)

All Funds (14)

98
97.871013
97
97.233328
96
95.707329
91
91.304794
81
81.45358
81
81.218809
77
77.318705
76
76.125207
50
50.213441
N/A
0
N/A
0
N/A
0
96
95.707329
97
96.614265857982

ETF.com Grade as 10/12/17

Fixed Income: U.S. - Broad Market Investment Grade

Tracking Difference (12 Month)

Ticker Expense Ratio Median Max. Upside Max. Downside Max LT/ST Cap Gains Rate Rule Legal Structure Fund Closure Risk Efficiency
AGGY WisdomTree Barclays Yield Enhanced U.S. Aggregate Bond Fund 0.12% -- -- -- 20.00% / 39.60% Low 0
HQBD Hartford Quality Bond ETF 0.39% -- -- -- 20.00% / 39.60% High 81.218809
AGND WisdomTree Barclays Negative Duration U.S. Aggregate Bond Fund 0.28% -0.63% -0.18% -1.55% 20.00% / 39.60% High 76.125207
NUBD NuShares ESG U.S. Aggregate Bond ETF 0.20% -- -- -- 20.00% / 39.60% Medium 50.213441
AGZD WisdomTree Barclays Interest Rate Hedged U.S. Aggregate Bond Fund 0.23% -0.84% -0.64% -1.15% 20.00% / 39.60% High 81.45358
SPAB SPDR Portfolio Aggregate Bond ETF 0.04% -0.12% -0.01% -0.38% 20.00% / 39.60% Low 95.707329
BND Vanguard Total Bond Market ETF 0.05% 0.07% 0.28% -0.40% 20.00% / 39.60% Low 91.304794
SCHZ Schwab US Aggregate Bond ETF 0.04% -0.14% -0.05% -0.22% 20.00% / 39.60% Low 97.233328
AGG iShares Core U.S. Aggregate Bond ETF 0.05% -0.06% 0.02% -0.14% 20.00% / 39.60% Low 97.871013
AGGE IQ Enhanced Core Bond U.S. ETF 0.32% -- -- -- 20.00% / 39.60% Low 0
NUAG NuShares Enhanced Yield U.S. Aggregate Bond ETF 0.20% -- -- -- 20.00% / 39.60% Low 0
BNDC FlexShares Core Select Bond Fund 0.35% -- -- -- 20.00% / 39.60% High 77.318705
BNDS SPDR Bloomberg Barclays Aggregate Bond ETF -0.11% -0.01% -0.38% 20.00% / 39.60% Low 95.707329
LAG SPDR Barclays Aggregate Bond -0.09% -0.01% -0.14% 20.00% / 39.60% Low 96.614265857982

ETF.com Tradability Insight

Active traders will find AGG’s and BND’s vastly superior liquidity to their liking, as the two funds combine to attract over 90% of segment volume with extremely tight spreads.Active traders will find AGG and BND vastly superior Institutional liquidities are also exemplary.
Retail investors can look beyond AGG and BND as LAG and SCHZ both get more than $1M in volume on most days, ample volume for retail investors. Of the two, SCHZ is a bit more institutional friendly with slightly lower creation fees per unit. Large orders in both will likely require some effort to execute with the help of liquidity providers but otherwise should be fair.
As the markets for AGZD and AGND continue to develop, trade them with care. They have been trading at double-digit wide spreads on thin volumes. Retail investors should use limit orders while institutions should work with issuer’s capital market desk and liquidity providers for the best execution. (Insight updated 10/20/17)

All Funds (14)

91
91
91
90.908668
89
89.433291
84
84.427241
53
52.674966
49
49.273658
42
41.949706
27
27.476591
N/A
0
N/A
0
N/A
0
N/A
0
84
84.427241
86
85.6440386

ETF.com Grade as 10/12/17

Fixed Income: U.S. - Broad Market Investment Grade

Ticker Median Daily Volume ($) Average Spread Creation Unit/Day Market Hours Overlap Underlying Volume/Unit % Creation Cost Per Unit (%) Impediment to Creations Score - Tradability
AGGY WisdomTree Barclays Yield Enhanced U.S. Aggregate Bond Fund $691.15 K 0.10% 0.14 100.00% 0.47% 0.01% None 0
AGND WisdomTree Barclays Negative Duration U.S. Aggregate Bond Fund $46.21 K 0.40% 0.00 100.00% 3.65% 0.01% None 49.273658
AGZD WisdomTree Barclays Interest Rate Hedged U.S. Aggregate Bond Fund $60.82 K 0.35% 0.01 100.00% -- 0.01% None 52.674966
BND Vanguard Total Bond Market ETF $130.66 M 0.01% 15.86 100.00% -- 0.00%% None 91
SCHZ Schwab US Aggregate Bond ETF $13.76 M 0.03% 2.61 100.00% 0.85% 0.01% None 89.433291
AGG iShares Core U.S. Aggregate Bond ETF $211.56 M 0.01% 19.31 100.00% -- 0.00% None 90.908668
AGGE IQ Enhanced Core Bond U.S. ETF $68.46 K 0.23% 0.07 100.00% 1.34% 0.05% None 0
NUAG NuShares Enhanced Yield U.S. Aggregate Bond ETF $171.29 K 0.19% 0.07 100.00% 5.92% 0.02% None 0
BNDC FlexShares Core Select Bond Fund $4.25 K 0.62% 0.00 100.00% 296.29% 0.00%% None 27.476591
HQBD Hartford Quality Bond ETF $0 0.12% 0 100.00% -- 0.00% None 41.949706
NUBD NuShares ESG U.S. Aggregate Bond ETF $7.62 K 0.10% -- -- -- -- N/A 0
SPAB SPDR Portfolio Aggregate Bond ETF $1.51 M 0.07% 0.52 100.00% -- 0.02% None 84.427241
BNDS SPDR Bloomberg Barclays Aggregate Bond ETF $1.46 M 0.26 100.00% -- 0.01% None 84.427241
LAG SPDR Barclays Aggregate Bond $2.37 M 0.41 100.00% -- 0.01% None 85.6440386

ETF.com/ Block Liquidity

BND
5
4
3
2
1
AGG
5
4
3
2
1
AGGY
5
4
3
2
1
SCHZ
5
4
3
2
1
NUAG
5
4
3
2
1
SPAB
5
4
3
2
1
AGND
5
4
3
2
1
AGZD
5
4
3
2
1
AGGE
5
4
3
2
1
BNDC
5
4
3
2
1
NUBD
5
4
3
2
1
HQBD
5
4
3
2
1
BNDS
5
4
3
2
1
LAG
5
4
3
2
1

This measurement shows how easy it is to trade 25,000 shares of each ETF.

ETF.com Fit Insight

Funds in the US broad investment-grade (Agg) segment can be largely divided into two groups: Vanilla and duration-hedged.
The four vanilla funds in the segment track essentially theAGZD and AGND turn the conventional core bond thinking on its head same index–Barclays US Aggregate Bond Index. (BND tracks a float-adjusted version of the index) There doesn’t seem to be material differences between the four funds. All four vanilla funds deliver market-like exposure in our view.
SCHZ has one of the highest Fit score. It delivers an almost identical exposure as our benchmark in all portfolio characteristics despite small and immaterial sector and maturity composition.
Tied with SCHZ, LAG also has one of the highest Fit scores. It delivers a market-like exposure. It takes the least amount of sector bet. Its sector breakdown is almost identical to our benchmark, with less than 1% deviation across all sectors.
Similar to SCHZ, AGG shares the same index as our benchmark. It also does a stellar job in delivering marketlike exposure, with a much smaller portfolio than BND. While without any meaningful sector bets, the portfolio has a slightly shorter maturity and duration than our benchmark, thanks to a significant cash position for real life portfolio management.
BND holds the broadest portfolio in the segment, with over 5K holdings (which adds up to about 16K once you unbundle the MBS in the portfolio into individual bonds), and a strong Fit score, to boot. BND’s underweighting in MBS and large cash position are likely due to unsettled MBS TBAs and offsetting cash collaterals.
WisdomTree introduced AGZD and AGND and effectively spiced up the previously boring US broad market investment grade segment. AGZD and AGND turn the conventional core bond thinking on its head. These two funds track the same parent long index with rate-hedged overlays. AGZD aims for net effective duration of 0 years while AGND aims for net effective duration of -5 years. The hedging strategies effectively decouple the performance of two funds from the broad bond market movement.
AGZD, aiming for net duration of 0 years, aims to achieve a “rate-neutral” core bond portfolio that captures the credit spread. It is a suitable pick for investors who are uncertain about the interest rate path. On the other hand, AGZD aims for net duration of -5 years which actually exposes investors to substantial interest rate risk, just not in a typical fashion. It is a pick only for those who strongly believe in an upward interest rate path. AGZD and AGND can also be useful tools to precisely shorten the duration of a larger fixed income allocation. Caution: A non-parallel shift in the yield curve can make precise hedging very difficult.
Overall, the four vanilla funds are solid choices for broad exposure to the investment grade US investment grade market. While AGZD and AGND deliver similar long exposures, they offer vastly different return profiles than the core bond market as a result of their rate-hedging overlays (Insight updated 10/20/17)

All Funds (14)

97
96.946957
97
96.863361
97
96.726964
97
96.575409
55
54.519929
51
51.158534
N/A
0
N/A
0
N/A
0
N/A
0
N/A
0
N/A
0
97
96.863361
98
98.36384415

ETF.com Grade as 10/12/17

Fixed Income: U.S. - Broad Market Investment Grade