iShares put two short-dated corporate bond
into registration-a high-yield fund and an investment-grade fund-in
an attempt to replicate two similar, but longer-dated corporate
bond ETFs. The plan addresses growing investor appetite for
shorter-duration debt at a time when the era of ultra-low yields
looks like it might be on the verge of beginning to end.
The two funds are as follows:
- iShares 0-5 Year High Yield Corporate Bond ETF
- iShares 0-5 Year Investment Grade Corporate Bond ETF
The two proposed funds look like iShares' two hugely popular
corporate bonds funds-the $19 million iShares iBoxx $ Investment
Grade Corporate Bond ETF (NYSEArca:LQD) and the $15 billion iShares
iBoxx $ High Yield Corporate Bond ETF (NYSEArca:HYG)-but the two
ETFs now in registration cherry-pick the shorter half of each
fund's targeted holdings.
While iShares does market a short-dated credit fund, the nearly
$11 billion iShares 1-3 Year Credit Bond ETF (NYSEArca:CSJ),
rolling out two shorter-duration corporate bond funds will allow
investors to more carefully calibrate corporate bond exposure to
help minimize the possibility of capital losses should official
interest rates and bond yields end up heading higher in the
The iShares 0-5 Year High Yield Corporate Bond ETF will hold
U.S. dollar-denominated, high-yield corporate bonds with less than
five years before maturity, tracking the Markit iBoxx USD Liquid
High Yield 0-5 Index. The index only includes bonds with less than
five years to maturity; additionally, a bond must also have at
least $350 million face-value to be included in the index.
The iShares 0-5 Years Investment Grade Corporate Bond ETF will
track the Markit iBoxx USD Liquid Investment Grade 0-5 Index, which
holds investment-grade corporate bonds with at least $500 million
face-value and no more than five years until maturity.
Each fund will track its underlying indexes using a passive
investment approach, mimicking the market-value-weighted
methodology of its underlying. No issuer will have more than a 3
percent allocation in either fund, and both funds will hold small-
to large-cap companies.
iShares didn't name tickers or prices for either fund.
Comparatively, LQD-the investment-grade ETF, has an annual expense
ratio of 0.15 percent, or $15 for each $10,000 invested, while HYG
costs 0.50 percent, or $50 for each $10,000 invested.
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