iShares Core € Corp Bond ETF EUR Dist (EUR) | IEAC |
by Jose Garcia-Zarate
iShares Core EUR Corporate Bond ETF is a fair option to gain broad exposure to the market of corporate bonds denominated in euros. The fund tracks an index that provides wide diversification across sectors and issuers. The compounding benefits of low fees are the key factor allowing the strategy to deliver returns above its Morningstar Category average over the long term. Investors seeking a low-cost core holding in this market will find that this strategy nicely fits the bill. The fund retains a Morningstar Medalist Rating of Bronze. Despite the benefits of low fees, this is a market exposure where experienced active managers may add value, for example via targeted sector and company calls or by modulating duration. Investors must also consider that the index provides sole exposure to corporate bonds, whereas the typical active fund in this category ventures into agency bonds at times of stress to limit risk, or alternatively to high yield to prop up returns at more favourable times. The index that this strategy tracks goes beyond the most liquid segments that passive funds in this category typically favour. This is thus the widest representation of the available opportunity set. However, this does not mean that the portfolio managers must buy bonds that may suffer from illiquidity. The use of stratified sampling for day-to-day management allows the portfolio managers to deliver the index return efficiently while avoiding pockets of the market that show liquidity constraints. Overall, this remains a fair option for investors seeking well-diversified exposure to this market at a low cost. The compounding benefits of low fees will provide a tailwind to returns at all times, and this underpins its Bronze rating. |
Morningstar Pillars | |
People | Above Average |
Parent | Above Average |
Process | Average |