IShares Core US Aggregate Bond ETF's AGG conservative portfolio and razor-thin expense ratio make it a compelling option. 

The fund tracks the Bloomberg US Aggregate Bond Index, which includes taxable, investment-grade US bonds with at least one year until maturity. Issuing activity in that market, which is dominated by US Treasuries, will dictate the portfolio's composition. Market-value weighting emphasizes the most liquid issues by harnessing the market's collective wisdom on the relative value of each bond.

The US investment-grade bond market is highly efficient and liquid, giving this fund an edge on pricier active strategies that must take greater risk to recoup their fees. Active managers allocate a higher percentage of assets to lower-quality bonds than this fund and the performance of those credit-risky bonds helps steer peer-relative performance. About 75% of the fund's assets carry an AA or AAA credit rating, 9 percentage points greater than the Morningstar Category average, as of March 2024. Some peers also hold a small allocation to high-yield bonds; this fund does not.

Since credit risk is muted, interest-rate risk primarily drives this fund’s performance. Its average effective duration was 6.1 years as of March 2024. While the gap has narrowed recently, its duration remains slightly little longer than the category average. This makes the fund more sensitive to interest-rate movements than some peers.

Since its 2003 inception, the fund beat its average peer by 19 basis points annualized, largely thanks to its 0.03% fee. Performance patterns have been predictable in different market environments. Thanks to minimal credit risk, the fund performs better than peers when credit spreads widen but worse when they narrow. Fund performance may be more volatile than peers when interest rates fluctuate because of its slightly longer duration. However, the gap is small, meaning those deviations should be kept to a minimum.

Analyst Rating

Low-cost US investment-grade bond coverage

Analyst

Zachary Evens

The strategy provides cost-effective access to the full taxable, US investment-grade bond market. It earns an Above Average Process Pillar rating.

Above Average

Process

BlackRock's fixed-income portfolio managers receive an Above Average People Pillar rating, reflecting the size and experience of its management team and its robust support system. This well-structured team has portfolio managers who specialize in specific subasset classes, ensuring in-depth research and expertise in their respective sectors. A global team of traders executes all trades and complements managers' specialization. A separate index analytics team provides crucial support for navigating corporate actions and index changes.

The management process benefits significantly from automation and the use of BlackRock's Aladdin platform, which streamlines many operational tasks and helps prevent errors. The managers skillfully match a portfolio’s key risks to those of its target index, a necessary action because most fixed-income indexes cannot be fully replicated. They also have the discretion to make strategic decisions within allowable tolerances when they identify opportunities to add value. Risk management is a top priority. An independent risk team provides rigorous oversight and sets tracking targets that it reviews regularly. This approach underscores the team's commitment to accurate index-tracking performance and proactive risk control.

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

iShares Core U.S. Aggregate Bond ETF

AGG tracks an index of US investment-grade bonds. The market-weighted index includes Treasuries, agencies, CMBS, ABS and investment-grade corporates.

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