This category was created to house the bond funds that all have global focus, either on corporate bonds or a mix of government and corporate debt. A global focus for fixed income is always beneficial for investors who are operating more defensively, and want to keep a high allocation to fixed income, but do not necessarily want to hold everything in safe-haven and low-yielding government bonds. For that reason we offer two globally broad ETFs and one that focuses entirely on low-rated debt – which can offer a higher yield for investors willing to take a bit more risk.
New list
iShares Global Corporate Bond UCITS ETF (CRPS)
The panel strongly recommended keeping this global corporate bond ETF in this year’s selection. It offers investors a broad range of investments, allowing easy diversification, good tracking and management, and a relatively low cost of 0.2 per cent. CRPS tracks the popular Bloomberg Barclays Global Aggregate Corporate Bond and is the cheapest and most liquid product on offer.
NEW: iShares Global Aggregate Bond UCITS ETF (SAGG)
For investors who want broad global diversification for their fixed-income investments, but want to operate in a safer space, iShares recently launched SAGG, which tracks the Bloomberg Barclays Global Aggregate Bond index – the broadest compilation of global debt available. ETF investors have been crying out for such a product, with providers unable to figure out the best way to track such a broad index via an ETF. However, iShares and SPDR have recently brought a product to market, and both priced their funds with a 0.1 per cent ongoing charge. Both also offer a sterling hedged version for the same price, a relatively unusual move. The panel strongly recommended offering one of these products and swung in favour of iShares due to its dominant size. iShares has already amassed over £700m in assets, making it far easier and cheaper to trade. So far SPDR’s ETF has a slightly better tracking difference, but the track record is not long enough to discern anything from this.
iShares Fallen Angels High Yield Corporate Bond UCITS ETF (RISE)
The panel recommended keeping this slightly esoteric option as it remains an excellent product. Fallen angels are bonds that have been downgraded from investment-grade and as a result tend to be oversold by institutional managers who no longer want to hold them. So this ETF is designed to capture high-yield bonds with higher credit quality than the wider market and at better valuations. The idea behind this strategy is that by grouping together the fallen angels, investors end up with a diversified portfolio of developed market high-yield bonds that have better fundamentals than other high-yield bonds in the market. RISE has an ongoing charge of 0.5 per cent, but ETFs running such a strategy remain limited, so it is difficult to discern whether this is expensive or not. Nonetheless, it has amassed a good level of assets and its bid/offer spread and liquidity are strong. This is an idea you have to buy into, but iShares offers a good product should you do so.
To view the IC Top 50 ETFs 2018 by category, please click on the links below:
Emerging market equities (four ETFs)
NEW: Sterling corporate bonds (two ETFs)
NEW: Global bonds (three ETFs)
Commodities and precious metals (three ETFs)
