A sound investment process and strong management team underpin iShares iBonds 2025 Term HY and Inc ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's sensible investment philosophy merits 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 BBB 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 iBonds 2025 Term HY and Inc 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 benchmark on a risk-adjusted basis over the long term. The leading factor in 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 firm's five-year retention rate of 92% also strengthens 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 Bloomberg 2025 Term High Yield and Income Index.  The fund will invest at least 80% of its assets in the component instruments of the underlying index, and it will invest at least 90% of its assets in fixed income securities of the types included in the underlying index. The underlying index is composed of U.S. dollar-denominated, taxable, fixed-rate, high yield and BBB or equivalently rated corporate bonds scheduled to mature between January 1, 2025 and December 15, 2025, and inclusive.  

 This strategy's 12-month yield is 7.2%, higher than its average peer's 6.4%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 7.1%. While a higher yield may deliver more income, it also tends 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. 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 1.0-year duration, is expected to gain 1.0% 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. Experience on the team is abundant, with 13 years of average 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.

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 iBonds 2025 Term High Yield and Income ETF

IBHE tracks a market-value-weighted index of USD-denominated, high yield and BBB-rated corporate bonds maturing in 2025. The fund will terminate in December 2025.

iShares iBonds 2025 Term High Yield and Income ETF (IBHE) holds a portfolio of high-yielding US dollar-denominated bonds that mature in 2025. From July 2025, the fund will hold cash and cash equivalents until termination.

IBHE: 7.2% With 1 Year Bonds

iShares iBonds 2025 Term High Yield and Income ETF is a less risky high-yield bond fund that will terminate at the end of 2025. The fund follows the Bloomberg 2025 Term High Yield and Income Index and uses representative sampling to construct its portfolio. 7% yield with no duration risk is an interesting prospect, but we tell you why we are staying out.

IBHE 2025: 7% Yield With No Duration Risk

The iShares iBonds 2025 Term High Yield and Income ETF is a fixed-term bond fund that seeks to track an index of high yield and income generating corporate bonds maturing in 2025. IBHE's portfolio consists of 173 bonds with an average yield to maturity of 8.2% and a 30-Day SEC Yield of 7.8%. With the current high interest rate environment and elevated default expectations, the forward return for investors buying IBHE today is only around 5%, making it less attractive compared to risk-free T-bills.

IBHE: Wait To Buy On Dips

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