Key Morningstar Metrics for iShares Core € Corp Bond UCITS ETF IEBC
- : BronzeMorningstar Medalist Rating
- : AverageProcess Pillar
- : Above AveragePeople Pillar
- : Above AverageParent Pillar
IShares Core € Corp Bond is a fair option to gain broad exposure to the euro-denominated corporate bond market. The exchange-traded fund tracks an index that provides wide diversification across sectors and issuers, while the compounding benefits of its low fees provide a nice tailwind to returns over long periods.
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 favorable times.
The Bloomberg Euro Corporate Bond Index, which this strategy tracks, goes beyond the most liquid segments that passive funds in this category typically favor. Therefore, this index provides the widest representation of the available opportunity set. However, this does not mean that the portfolio managers are obliged to buy illiquid bonds. The use of stratified sampling for day-to-day management of bond passive funds allows the managers to efficiently deliver the index return while avoiding pockets of the market that experience liquidity constraints.
Overall, investors seeking a low-cost core holding in this market will find that this strategy fits the bill. The compounding benefits of low fees provide a tailwind to returns, but there are avenues for active managers to add value.
iShares Core € Corp Bond UCITS ETF: Performance Highlights
Performance will be partially determined by the vagaries of the monetary policy cycle. All-maturity passive funds in this category typically capture the full upside and downside as markets adapt to changes in the monetary policy cycle.
The purity of the exposure—that is, being a 100% corporate bond fund—also means that the typical passive fund in this category is more exposed to drawdowns at times of stress relative to funds with the ability to shift the portfolio toward less-risky areas of the bond market.
The compounding benefits of the strategy’s low cost add up, and this is the key factor that can produce returns above the category average over extended periods. But ultimately, this is a market exposure where experienced active managers can add value, for example, via targeted sector and company calls or by modulating duration.
