A sound investment process and strong management team underpin iShares Agency Bond ETF's Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in government bonds and debt with 15- to 20-year maturities compared with category peers. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

iShares Agency Bond ETF earns a High Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. The most substantial contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Strong risk-adjusted performance also supports the process. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. The firm's five-year retention rate of 92% supports the process as well.

The investment strategy as stated in the fund's prospectus is: 

The investment seeks to track the investment results of the Bloomberg U.S. Agency Bond Index.  The index measures the performance of the agency sector of the U.S. government bond market and is composed of investment-grade U.S. dollar-denominated publicly-issued government agency bonds or debentures. The fund will invest at least 80% of its assets in the component securities of the index and TBAs that have economic characteristics that are substantially identical to the economic characteristics of the component securities of the index.  

 This strategy has a modest 3.2% 12-month yield, lower than its average peers' 3.6%. In addition, it has a 4.4% 30-day SEC yield (a measure similar to yield-to-maturity). While a lower yield may deliver less income, it also tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated AA. In terms of long-term interest-rate risk, this strategy is on par with peers. The longer a strategy's duration, the more sensitive it is to shifts in interest rates. This fund, with a 3.2-year duration, is expected to gain 3.2% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

High

Process

iShares Agency Bond ETF benefits considerably from its fixed income team, earning it an Above Average People Pillar rating. There are two managers listed on the fund: James Mauro, Karen Uyehara. The team is well equipped, with an average of 13 years of portfolio management experience. Together, they manage a total of 114 strategies, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

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 Agency Bond ETF

AGZ tracks a market-value-weighted index of agency debt owned or issued by the US government or its affiliates.

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