A sound investment process and strong management team underpin iShares Inflation Hedged Corp Bd ETF's Morningstar Medalist Rating of Gold. 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 a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in B rated bonds and government 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 iBoxx $ Investment Grade Corporate Bond ETF

Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. iShares Inflation Hedged Corp Bd ETF earns a High Process Pillar rating.    The main driver of the rating is the fund's impressive long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. This fund tracks an index, which also increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The firm's five-year retention rate of 92% contributes to the process as well.

 Compared with other funds in the Corporate Bond Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the category average, the managers have been underweight B rated bonds in recent years. In the latest month, the strategy has also relatively underweighted B rated bonds compared with Morningstar Category peers. Additionally, the managers have shown a notable sector bias away from government bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to government bonds than peers. Finally, during the past few years, the fund leaned meaningfully away from debt with one- to three-year maturities. In recent months, the strategy also had less exposure to debt with one- to three-year maturities compared to its peers.

 This strategy's 12-month yield is 4.2%, which is neck-and-neck with its average peer. In addition, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 4.3%. The portfolio has a higher average surveyed credit quality of A, compared with the category average of BBB, and it holds no non-investment-grade assets, despite the average peers' 13%. Lower-credit-risk strategies are often able to navigate bear markets more effectively.

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, 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, 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.

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 Inflation Hedged Corporate Bond ETF

LQDI tracks an index that holds the iShares iBoxx USD Investment Grade Corporate Bond ETF (LQD), which targets investment-grade corporate bond, while using swaps to hedge inflation risk.

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M&A was almost dormant in 2023. In the US, as a proportion of the market value of the benchmark equity indices, it fell to its lowest level in 20 years, according to McKinsey. Credit investors are not traditionally supposed to be fans of M&A, and it's true we are wary of leveraging M&A, where debt is loaded onto balance sheets to buy competitors. We are seeing a comeback for M&A that we think is likely to continue through 2024.

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News for iShares Inflation Hedged Corporate Bond ETF ETF (LQDI)