An institutional investor in search of potential ETF exposure to “A” rated corporate bonds led us to QLTA (iShares Aaa – A Rated Corporate Bond, Expense Ratio 0.15%) which debuted back in February of 2012 and recently crossed its three year anniversary of live performance (3-star Morningstar rated).
The ETF’s symbol almost implies “Quality,” presumably on purpose by those behind this creation at iShares and last December’s upheaval in the High Yield Corporate Bond market has caused many institutions to reconsider their allocations to High Yield
Corporate, perhaps shifting more towards not only Investment Grade, but specifically Aaa-A rated corporate bond issues.
By design QLTA tracks the Barclays Capital U.S. Corporate Aaa-A Capped Index which according to fund literature provides “1) Exposure to the most highly rated U.S. corporate bonds 2) Targeted access to a specific segment of the domestic corporate bond market and 3) Use to express a view on bonds with a specific rating and seek to generate income.”
We also see that currently eight hundred five individual bond issues are held within the portfolio in the Aaa-A rates space.
To date more than $415 million has entered the fund which places it well above some of its peers in a rather “niche” oriented space within Investment Grade Corporate Bond ETFs. XTF.com labels several other iShares ETFs as comparable to QLTA, but these particular funds are not well known to the investment public at least judging by their rather small asset levels.
These include ENGN (iShares Industrials Bond, Expense Ratio 0.30%, $5.1 million in AUM), MONY (iShares Financials Bond, Expense Ratio 0.30%, $5.4 million in AUM), and AMPS (iShares Utilities Bond, Expense Ratio 0.30%, $15.9 million) but as one can see by the titles of these funds, they target their bond exposure to specific industry sectors unlike QLTA which is more broad based. Speaking of sector exposure, QLTA has its highest weighting toward the “Banking” sector according to fund literature (35.02% of the portfolio), which iShares differentiates from other sub-sectors within the greater Financials category (3.75% weighting to “Insurance”, 2.82% weighting to “Finance Companies,” and a 0.70% weighting to “Brokerage/Asset Managers/Exchanges.”)