A sound investment process and strong management team underpin iShares Core 1-5 Year USD Bond ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in corporate bonds and A 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 Core 1-5 Year USD 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 benchmark on a risk-adjusted basis over the long term. The most important 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. The firm's five-year retention rate of 92% also underpins the rating. 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 U.S. Universal 1-5 Year Index and which measures the performance of U.S. dollar-denominated taxable bonds that are rated either investment-grade or high yield with remaining effective maturities between one and five years.  The fund will invest at least 80% of its assets in the component securities of the index and TBA transactions that have economic characteristics that are substantially identical to the economic characteristics of the component securities of the index and it will invest at least 90% of its assets in fixed income securities of the types included in the index.  

 This strategy has a modest 3.1% 12-month yield, lower than its average peers' 3.7%. In addition, it has a 4.8% 30-day SEC yield (a measure similar to yield-to-maturity). While a lower yield may deliver less income, it also tends to indicate lower credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been lower than the average yield of its Morningstar Category peers. The portfolio has a lower average credit rating of BBB, compared with the category average's A and its non-investment-grade stake is 8% of assets, compared to its peers' 2%. Strategies that take on more credit risk tend to be at their best when markets are as well. This risk contributes to strong performance during bull markets at the cost of losing more on the downside. 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 2.6-year duration, is expected to gain 2.6% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

Above Average

Process

iShares Core 1-5 Year USD Bond ETF benefits considerably from its team, earning it 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 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.

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 Core 1-5 Year USD Bond ETF

ISTB tracks a broad USD-denominated bond index with 1-5 years remaining in maturities.

The iShares Core 1-5 Year USD Bond ETF holds treasuries and investment-grade corporate bonds. Its 2% yield may not be particularly appealing for income seekers.

ISTB: Short-Term Bonds Are Useful Under Certain Conditions

ISTB keeps things short. Short-term, that is. It buys bonds maturing in 1-5 years. We are OK with the Treasury ladder that is the core of this ETF, but the corporate bond portion gives us pause.

ISTB: A Short-Term Bond ETF That Takes Unnecessary Risks

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News for iShares Core 1-5 Year USD Bond ETF ETF (ISTB)