iShares Adds Junk Bond ETF Family

Today iShares has launched five ETFs constituting the foundations of a new group of iBonds ETFs. The iBonds family prior to today simply covered the municipal and investment-grade corporate bond spaces, with each fund featuring muni or corporate bonds maturing during a specific year. This latest launch expands the family to include the high-yield corporate bond space. The move brings the total number of iBonds ETFs to 29 funds.

The new funds are as follows:

• iShares iBonds 2021 Term High Yield and Income ETF (IBHA)
• iShares iBonds 2022 Term High Yield and Income ETF (IBHB)
• iShares iBonds 2023 Term High Yield and Income ETF (IBHC)
• iShares iBonds 2024 Term High Yield and Income ETF (IBHD)
• iShares iBonds 2025 Term High Yield and Income ETF (IBHE)

Each fund comes with an expense ratio of 0.35% and lists on Cboe Global Markets, parent company of ETF.com.

Methodology

The new iBonds ETFs cover U.S. dollar-denominated debt issued by corporations that can be callable or noncallable. Bonds must have at least $250 million face value outstanding when they are added to the index. To maintain diversification, the fund can begin to include BBB-rated debt 2 1/2 years before it reaches its liquidation date. This occurs if the value of the total bonds represented in the index falls below $30 billion as it nears maturity, according to the prospectus. Debt rated BBB is generally considered one step above junk bond status.  

“In the U.S., we have an increasing number of investors that are either at or approaching retirement. For a lot of these investors, generating income in their fixed income portfolios is paramount, and a lot of times is the No. 1 objective they’re trying to get from their fixed income portfolios,” said iShares Vice President Jon Rather, a member of BlackRock’s fixed income product strategy team. The new iBonds are designed for those investors seeking to generate higher income, he adds.

Rather says investors have been requesting targeted and precise bond ETF exposures across the yield curve.

Invesco also offers a BulletShares target-maturity bond family focused on junk bonds. However, the high-yield BulletShares come with an expense ratio of 0.42%, 7 basis points more than what is charged by the iShares family.

Contact Heather Bell at [email protected]