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Is Inspire Corporate Bond ESG ETF (IBD) a Strong ETF Right Now?

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The Inspire Corporate Bond ESG ETF (IBD - Free Report) made its debut on 07/10/2017, and is a smart beta exchange traded fund that provides broad exposure to the Investment Grade Corporate Bond ETFs category of the market.

What Are Smart Beta ETFs?

The ETF industry has long been dominated by products based on market cap weighted indexes, a strategy created to reflect the market or a particular market segment.

A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.

However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: 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.

The smart beta space gives investors many different choices, from equal-weighting, one of the simplest strategies, to more complicated ones like fundamental and volatility/momentum based weighting. However, not all of these methodologies have been able to deliver remarkable returns.

Fund Sponsor & Index

Because the fund has amassed over $225.02 million, this makes it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. IBD is managed by Inspire. Before fees and expenses, IBD seeks to match the performance of the Inspire Corporate Bond Impact Equal Weight Index.

The Inspire Corporate Bond Impact Equal Weight Index is comprised of 250 investment grade, intermediate term corporate bonds issued by some of the most inspiring large cap blue chip companies in the United States.

Cost & Other Expenses

When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.

Annual operating expenses for IBD are 0.44%, which makes it one of the most expensive products in the space.

The fund has a 12-month trailing dividend yield of 1.41%.

Sector Exposure and Top Holdings

It is important to delve into an ETF's holdings before investing despite the many upsides to these kinds of funds like diversified exposure, which minimizes single stock risk. And, most ETFs are very transparent products that disclose their holdings on a daily basis.

Taking into account individual holdings, Usd accounts for about 2.84% of the fund's total assets, followed by Cboeglobalmarketsinc.3.6501/12/27 and Parkerhannifincorp.31/406/14/29.

The top 10 holdings account for about 12.32% of total assets under management.

Performance and Risk

Year-to-date, the Inspire Corporate Bond ESG ETF has lost about -8.06% so far, and is down about -9.77% over the last 12 months (as of 07/13/2022). IBD has traded between $22.99 and $26.52 in this past 52-week period.

The fund has a beta of 0.16 and standard deviation of 8.07% for the trailing three-year period. With about 247 holdings, it effectively diversifies company-specific risk.

Alternatives

Inspire Corporate Bond ESG ETF is not a suitable option for investors seeking to outperform the Investment Grade Corporate Bond ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.

IShares ESG Aware MSCI EAFE ETF (ESGD - Free Report) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU - Free Report) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $6.34 billion in assets, iShares ESG Aware MSCI USA ETF has $21.37 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.

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.

Bottom Line

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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