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Is iShares Investment Grade Bond Factor ETF (IGEB) a Strong ETF Right Now?
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Designed to provide broad exposure to the Investment Grade Corporate Bond ETFs category of the market, the iShares Investment Grade Bond Factor ETF (IGEB - Free Report) is a smart beta exchange traded fund launched on 07/11/2017.
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
The fund is managed by Blackrock. IGEB has been able to amass assets over $251.31 million, making it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. Before fees and expenses, IGEB 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.18% for IGEB, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.42%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Taking into account individual holdings, Blk Csh Fnd Treasury Sl Agency-5.18% accounts for about 0.63% of the fund's total assets, followed by Targa Resources Partners Lp-4.88%-02-01-2031 and Jpmorgan Chase & Co-5.00%-12-31-2079.
The top 10 holdings account for about 5.47% of total assets under management.
Performance and Risk
The ETF return is roughly 2.77% so far this year and is down about -1.58% in the last one year (as of 08/15/2023). In the past 52-week period, it has traded between $41.26 and $45.89.
IGEB has a beta of 0.29 and standard deviation of 7.20% for the trailing three-year period. With about 417 holdings, it effectively diversifies company-specific risk.
Alternatives
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 - Free Report) tracks Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index and the Vanguard Total International Bond ETF (BNDX - Free Report) tracks Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index. Vanguard Short-Term Corporate Bond ETF has $36.22 billion in assets, Vanguard Total International Bond ETF has $50.55 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.
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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Is iShares Investment Grade Bond Factor ETF (IGEB) a Strong ETF Right Now?
Designed to provide broad exposure to the Investment Grade Corporate Bond ETFs category of the market, the iShares Investment Grade Bond Factor ETF (IGEB - Free Report) is a smart beta exchange traded fund launched on 07/11/2017.
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.
Market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns, and are a good option for investors who believe in market efficiency.
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.
By attempting to pick stocks that have a better chance of risk-return performance, non-cap weighted indexes are based on certain fundamental characteristics, or a combination of such.
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
The fund is managed by Blackrock. IGEB has been able to amass assets over $251.31 million, making it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. Before fees and expenses, IGEB 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
Expense ratios are an important factor in the return of an ETF and in the long-term, cheaper funds can significantly outperform their more expensive cousins, other things remaining the same.
Operating expenses on an annual basis are 0.18% for IGEB, making it on par with most peer products in the space.
The fund has a 12-month trailing dividend yield of 4.42%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Taking into account individual holdings, Blk Csh Fnd Treasury Sl Agency-5.18% accounts for about 0.63% of the fund's total assets, followed by Targa Resources Partners Lp-4.88%-02-01-2031 and Jpmorgan Chase & Co-5.00%-12-31-2079.
The top 10 holdings account for about 5.47% of total assets under management.
Performance and Risk
The ETF return is roughly 2.77% so far this year and is down about -1.58% in the last one year (as of 08/15/2023). In the past 52-week period, it has traded between $41.26 and $45.89.
IGEB has a beta of 0.29 and standard deviation of 7.20% for the trailing three-year period. With about 417 holdings, it effectively diversifies company-specific risk.
Alternatives
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 - Free Report) tracks Bloomberg Barclays U.S. 1-5 Year Corporate Bond Index and the Vanguard Total International Bond ETF (BNDX - Free Report) tracks Bloomberg Barclays Global Aggregate ex-USD Float Adjusted RIC Capped Index. Vanguard Short-Term Corporate Bond ETF has $36.22 billion in assets, Vanguard Total International Bond ETF has $50.55 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.
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.