A sound investment process and strong management team underpin iShares High Yield Systematic 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 effective investment philosophy supports a High 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 BB 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

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 High Yield Systematic Bond ETF earns a High Process Pillar rating.    The main driver of 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. Noteworthy risk-adjusted performance also contributes to the process. This can be seen in the fund's five-year alpha calculated relative to the category average, which suggests that the managers have shown skill in their allocation of risk. The firm's five-year retention rate of 92% supports the process as well.

 Compared with other funds in the High Yield Bond Morningstar Category, this fund's cash position and interest-rate sensitivity are historically in line with peers over the past few years. 

 This strategy has a 6.9% 12-month yield, higher than its average peer's 6.4%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 7.4%. Higher yields tend to indicate higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher 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 B.

High

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, Scott Radell. The team is well equipped, with an average of 14 years of portfolio management experience. Together, they manage a total of four strategies, with a Bronze 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.

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 High Yield Bond Factor ETF

HYDB tracks a broad-maturity, multifactor index of high-yield bonds. The index selects and weights bonds based on default probability, default-adjusted spreads, and volatility.

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