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

 The strategy's investment process inspires confidence and earns it a High Process Pillar rating. 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

Gannett Co.

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 Convertible Bond ETF earns a High Process Pillar rating. The largest 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 beat 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% supports the process as well.

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

The investment seeks to track the investment results of the Bloomberg U.S. Convertible Cash Pay Bond > $250MM Index (the "underlying index").  The fund will invest at least 80% of its assets in the component securities 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 that BFA believes will help the fund track the underlying index. The underlying index is a subset of the Bloomberg U.S. Convertibles: Cash Pay Bonds Index, and which measures the performance of the U.S. dollar-denominated convertibles market.  

 iShares Convertible Bond ETF is currently in the Convertibles Morningstar Category.The portfolio is positioned across 332 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 10.9% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 70.1%.  And, in terms of portfolio turnover, on a year-over-year basis, 22% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

iShares Convertible Bond ETF benefits considerably from its team, earning it an Above Average People Pillar rating. There are two managers listed on the fund: Karen Uyehara, James Mauro. Experience on the team is abundant, with 14 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: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

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 Convertible Bond ETF

ICVT tracks an index of USD-denominated convertible bonds weighted by market value. The index contains only cash-pay convertibles and excludes mandatory and preferred convertibles.

iShares Convertible Bond ETF has been stagnant compared to broader U.S. indices despite strong equity markets, particularly in tech. The equity component in the ICVT ETF, which is also exposed 40% to tech issues, should start to catch up. Moreover, we think maturity walls should start transmitting the more restrictive policy into markets and could allow for rate hikes soon to help the fixed income component.

ICVT: Could Be In Line For Growth

Convertible bonds offer the potential for high rewards and diversification in a volatile market. The iShares Convertible Bond ETF is a recommended investment for 2024 due to its potential for competitive total returns. ICVT allows investors to participate in the resurgence of convertible securities and offers a balanced approach between stocks and bonds.

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ICVT: Expect A Period Of Strong Performance

ICVT contains convertible bonds primarily of tech stocks. While tech stocks are languishing right now, the volatility of markets and potential of peaking inflation in the next months give value to the conversion option.

ICVT Maybe A Little Too Cheap Given The Equity Option

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ICVT Doesn't Make Sense To Us In The Current Market

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