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

 The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in securitized debt and debt with over 30-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

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Morningstar's evaluation of this fund's process seeks to understand management's investment philosophy, and whether it has been applied consistently over time and can add value across the market cycle. iShares Yield Optimized Bond ETF earns a High Process Pillar rating.    The predominant contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's five-year risk-adjusted success ratio of 55% also influences the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their respectable success ratio suggests that the firm does well for investors and that this fund may benefit from that. The firm's five-year retention rate of 92% reinforces the process as well.

 Compared with other funds in the Intermediate Core-Plus Bond Morningstar Category, this fund takes on significantly higher credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the category average, the managers have been meaningfully underweight securitized debt in recent years. In the latest month, the strategy has also relatively underweighted securitized debt compared with Morningstar Category peers. Additionally, there's been a notable bias away from debt with longer than 30-year maturities over the past few years. In the most recent month, however, the fund's exposure to debt with longer than 30-year maturities was in line with the Morningstar Category average. Finally, during the past few years, the fund leaned meaningfully away from AAA rated bonds. In recent months, the strategy also had less exposure to AAA rated bonds compared to its peers.

 This strategy has a 4.6% 12-month yield, higher than its average peer's 3.9%. It also has a 4.6% 30-day SEC yield (a standardized, point-in-time estimate of the fund’s future income return). Typically, higher yields come at the cost of higher credit risk. The portfolio has a lower average credit rating of BB, compared with the category average's BBB and 25% of the fund's assets are rated non-investment-grade, compared to its peers' 8%. Strategies with more credit risk may have a higher return, but they are riskier.

High

Process

iShares Yield Optimized Bond ETF benefits considerably from its team, earning it an Above Average People Pillar rating. There are three managers listed on the fund: Greg Savage, Jennifer Hsui, Paul Whitehead. Experience on the team is abundant, with 18 years of average portfolio management experience. Together, they manage a total of 258 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, demonstrating their potential 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 Yield Optimized Bond ETF

BYLD is a fund-of-funds that tracks a broad index of debt securities optimized for yield and mean variance.

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