Strength in iShares Aaa - A Rated Corporate Bond ETF's People Pillar is partially offset by an Average Process Pillar rating, leading to a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy receives an 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 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 Aaa - A Rated Corporate Bond ETF earns an 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 primary contributor to the rating is the firm's five-year retention rate of 92% over the period. 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. Lastly, the process is limited by the fund's mediocre long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

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

The investment seeks to track the investment results of the Bloomberg U.S. Corporate Aaa - A Capped Index.  The fund will invest at least 80% of its assets in the component securities of the underlying index, and the fund 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. Corporate Index, which measures the performance of the Aaa - A rated range of the fixed-rate, U.S. dollar-denominated taxable, and corporate bond market.  

 This strategy's 12-month yield is 3.6%, lower than its average peers' 4.2%. Plus, its 30-day SEC yield (a measure similar to yield-to-maturity) sits at 5.0%. A lower yield tends to indicate lower credit risk. The portfolio holds assets with 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%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress. 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 7.0-year duration, is expected to gain 7.0% of its net asset value if interest rates drop by 1 percentage point, and vice versa.

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 a Silver 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 Aaa-A Rated Corporate Bond ETF

QLTA tracks a market-weighted index of dollar-denominated fixed-rate corporate bonds rated AAA-A issued by US and non-US corporations with maturities of at least one year.

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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.

The Credit Opportunity In M&A

The iShares Aaa - A Rated Corporate Bond ETF tracks highly rated corporate bond securities issued by US and non-US corporations. Despite its high-quality portfolio, QLTA has delivered modest returns, ranking fourth quartile against the Morningstar Corporate Bond category. This is because the QLTA gives up 65-70 bps in yield for a nominal improvement in credit quality.

QLTA: When Quality Is Too Much Of A Good Thing

iShares Aaa – A Rated Corporate Bond ETF is an exchange-traded fund. The vehicle holds a very granular portfolio of investment-grade bonds, with an "A" average rating.

QLTA: Liquid Investment-Grade Bond Fund, 7-Year Duration

SPDR Portfolio Long Term Corporate Bond ETF

Vanguard Long-Term Corporate Bond ETF

Since the Fed has started buying highly rated corporate bond ETFs, investors can expect a short-term bounce in those assets.

Highly Rated Corporate Bond ETFs to Gain on Fed Buying

The Fed is buying investment-grade corporate bond ETFs, which might lead to a rally in the space.

All-Out Fed Support: Buy Highly-Rated Corporate Bond ETFs

iShares Aaa-A Rated Corporate Bond ETF: Investors May Want To Wait On The Sidelines

iShares Fallen Angels USD Bond ETF

As volatility seen has been racking the capital markets as of late, it has spurred activity in the bond markets, but BBB bonds, the lowest of investment-grade bonds, is one looming risk that could put the use of strategic fixed income funds in focus.

News for iShares Aaa-A Rated Corporate Bond ETF ETF (QLTA)