Investors hunting for yield have made U.S. corporate bonds,
both investment-grade and junk fare, popular destinations. That
much is evident by the more than $23.5 billion in assets sitting
in the iShares iBoxx $ Investment Grade Corporate Bond Fund
), the bellwether corporate bond ETF.
The iShares iBoxx $ Investment Grade Corporate Bond Fund is a
lot of things. Home to even modest international exposure is not
one of those things. It stands to reason that if investors are
groomed to at least consider international stocks, that they
should do the same with corporate bonds.
"By expanding the investable universe to corporations outside
the United States, the size of the opportunity set more than
doubles (2.54x)," said WisdomTree Portfolio Manager Rick Harper
in a new research note. "In fact, there have been a growing
number of institutional investors pursuing wider corporate credit
mandates, a strategy referred to as 'expanding the core.'
Importantly, taking a more global approach to corporate bonds
does not mean significantly increased credit risk. Part of the
allure with LQD is that nearly 28 percent of the ETF's holdings
are rated A- by Standard & Poor's,
according to iShares data
. Another 25 percent are rated A or A+.
The newly minted and actively managed WisdomTree Global
Corporate Bond Fund (NASDAQ:
) is home to its own sturdy credit profile. Over 51 percent of
GLCB's holdings are rated A or AA,
according to issuer data
Yes, GLCB is heavily allocated to the U.S. (almost 52
percent), but it is not a pure play U.S. corporate bond ETF.
Overall, GLCB holds bonds from corporate issuers in 15 countries.
Four of those countries - Russia, Mexico, Brazil and Colombia -
are emerging markets.
Six of GLCB's country components are eurozone members. Those
are Italy, France, Spain, Germany, Netherlands and Belgium.
Although the new ETF's credit profile indicates that investors
are taking on substantially higher risk with global corporates,
the fund does superior yield compensation.
"In addition to expanding the number of opportunities,
investors have also been compensated with higher yields across
virtually all credit ratings by investing in global credit risk
as opposed to a purely U.S. approach,"
GLCB's average yield to maturity is 3.72 percent, or 87 basis
points higher than LQD's. Investors concerned about rising
interest rates will also want to have a look at GLCB. The new ETF
has an effective duration of 5.54 years compared to 7.94 years on
GLCB's largest country weights after the U.S. are the U.K.
(9.56 percent), Russia (4.51 percent), Italy (4.42 percent) and
Mexico (3.6 percent). The ETF, which charges 0.45 percent per
year, debuted in late January and now has over $7.6 million in
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