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

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in corporate bonds and an underweight in B rated bonds 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 BB Rated Corporate Bond ETF earns an Above Average Process Pillar rating. Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. The primary 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. The firm's five-year retention rate of 92% also contributes to the process. Lastly, the process is limited by its parent firm's risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.1 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

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

The investment seeks to track the investment results of the ICE BofA BB U.S. High Yield Constrained Index composed of BB (or its equivalent) fixed rate U.S. dollar-denominated bonds issued by U.S. and non-U.S. corporate issuers.  The fund will invest at least 80% of its assets in the component securities of the underlying index and and the fund will invest at least 90% of its assets in fixed income securities of the types included in the underlying index that BFA believes will help the fund track the underlying index.  

 This strategy has a modest 6.0% 12-month yield, lower than its average peers' 6.4%. While a lower yield may deliver less income, it also tends to indicate lower credit risk. The portfolio holds assets with a higher average surveyed credit quality of BB, compared with the category average of B. Lower-credit-risk strategies are often able to navigate bear markets more effectively. 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 3.7-year duration, is expected to gain 3.7% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

Above Average

Process

iShares’s team is strong compared with others in the industry, resulting in 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 a Silver asset-weighted average Morningstar Medalist Rating, indicating the 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.

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 BB Rated Corporate Bond ETF

HYBB tracks a market value-weighted index that only includes bonds with a credit rating of BB.

The iShares BB Rated Corporate Bond ETF focuses on BB rated fixed income securities in the US corporate debt market. Credit spreads are too low given the risks to corporate debt from the uncertain economic situation and impending maturity walls.

HYBB: Credit Spreads Historically Low

Junk bonds offer higher risk for higher yield, but the overall junk bond market is too risky. HYBB is a unique ETF that holds BB-rated corporate bonds, offering more risk and yield. BB bonds have shown resiliency in turbulent times compared to its other junk-rated peers.

HYBB: 'BB'ump Up Your Yield For Just A Little More Risk

iShares BB Rated Corporate Bond ETF is a fixed income exchange traded fund. HYBB's holdings consist mostly of BB credits, with the largest sectoral allocation in consumer cyclicals. BB credits represent the first band of the high yield universe, and exhibit the lowest probabilities of default when compared to 'B' and 'CCC' names.

HYBB: Not The Conservative High Yield Fund You Expected

The iShares BB Rated Corporate Bond ETF (HYBB) provides exposure to high-quality high yield bonds but has historically underperformed the broader high-yield market. Investors seeking high-quality high-yield bonds should consider the VanEck Fallen Angel High Yield Bond ETF (ANGL) instead. Fallen angels, like those included in the ANGL ETF, have shown better credit characteristics and the potential for outperformance.

HYBB: Save Your Time And Consider ANGL Instead

HYBB is a less risky alternative to other junk bond ETFs like JNK, investing primarily in higher-tier BB rated bonds. With a 30-day SEC yield of about 7.1%, HYBB offers a higher yield than investment-grade corporate bond ETFs like VTC. HYBB is a suitable investment for those who believe in a mild recession and want to take risks in the market while avoiding extreme risks.

HYBB: A Risk-Return Sweetspot

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Recent uncertainty, instigated by the issues seen across the financial sector, has led to a change in investment flows seen across exchange traded funds. A change in investment flows can be seen over the month of March as equity market volatility has increased.

ETF Flows, The Winners And Losers In Volatile Markets

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The three funds range from B to CCC credit ratings.

BondBloxx Debuts High Yield ETFs Targeting Specific Credit Rating

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Ultra-low interest rates make it difficult for investors to earn yields in excess of inflation. High-yield bonds can be a source of income in today's market.

6 Styles Of High-Yield Bond ETFs

On Thursday, BlackRock announced the launch of the iShares BB Rated Corporate Bond ETF (NYSE: HYBB). The fund will seek to track the investment results of the ICE Bank of America BB US High Yield Constrained Index (HUC1) and is the first ETF to offer this exposure to investors in the United States.

News for iShares BB Rated Corporate Bond ETF ETF (HYBB)