Home>Video>The Whole Bond Market for a Slim Fee

The Whole Bond Market for a Slim Fee

Thu, 14 Apr 2016

IShares Core Total USD Bond Market ETF grants exposure to emerging-markets and high-yield bonds alongside high-quality, investment-grade fare, says Morningstar's Brian Moriarty.


Video Transcript

The iShares Core Total USD Bond Market ETF, ticker IUSB, is the only ETF that tracks the Barclays U.S. Universal Bond Index, which is the parent index of the more commonly used Barclays U.S. Aggregate Bond Index.

While most of the fund is invested in high-quality, investment-grade debt, IUSB does have a roughly 16% allocation to the more volatile high-yield and emerging-markets sectors, which are excluded from ETFs that track the Aggregate index.

This means that IUSB is more vulnerable to a weak economy or a sell-off in the credit markets. But it also means it will outperform when those sectors do well, which has been the case so far this year. From Jan. 1 through March 31, the fund was in the top third of its category and has beaten competitors that track the Aggregate index.

Instead of holding multiple funds to gain access to U.S. Treasuries, emerging-markets debt, securitized debt, and corporate and high-yield bonds, IUSB grants exposure to all of them for the tiny expense of 12 basis points.

  1. Related Videos
  2. Related Articles
  1. The Picks Panel: Best Ideas From Morningstar Analysts

    Whether you need to fill a hole in your retirement portfolio or want to find a world-class company at a bargain-basement stock price, a trio of Morningstar specialists share their shopping lists of topnotch candidates.

  2. Investors Still Beating a Path to Bonds

    October data show continued inflows for bonds (including riskier fixed-income assets), while investors withdrew money from U.S. stock mutual funds and ETFs .

  3. Key Themes for Fixed-Income ETFs

    Panelists at the Morningstar 2013 ETF Invest Conference addressed trending topics of high - yield duration, bank-loan vehicles, near-term credit and interest-rate risk, and the tendency for bond ETFs to smooth volatility.

  4. Unearthing Value in Bonds

    Panel discussion: TCW's Laird Landmann, Loomis Sayles' Elaine Stokes, and Gibson Smith of Janus explore potential areas of opportunity in the credit markets, the prospect of a liquidity crisis, and more.

  5. How to Protect Yourself Against Bond -Market Illiquidity

    Morningstar's Sumit Desai explores which parts of bond market are most susceptible to a liquidity event, what fund managers are doing in response, and how investors can protect themselves.

  6. Become a Better Index Investor

    Roundtable Report: Experts dig into the ETF versus index fund debate, active and passive strategies, fixed-income benchmarks, factor investing, and much more.

  7. More Fund Investors Pick Passive Products

    ETF and open-end asset flows combined show a strong preference for bonds , emerging markets , and passive funds, while active U.S. stock fund managers and money market funds have suffered the brunt of outflows.

  8. PIMCO Total Return: The Mutual Fund vs. the ETF

    The performance differences have narrowed between the two funds recently, and Morningstar's Tim Strauts and Eric Jacobson say PIMCO investors should choose the least expensive option.

©2017 Morningstar Advisor. All right reserved.