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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.

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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.

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