Have You Considered a Bond-Laddering Investment Strategy? | ETF Trends

Bond exchange traded funds with defined maturity dates have a strong place in a fixed income investor’s portfolio. Under its iShares brand, BlackRock gives investors just that with its latest iShares iBonds 2026 Term High Yield and Income ETF (IBHF).

IBHF seeks to track the investment results of the Bloomberg Barclays 2026 Term High Yield and Income Index composed of U.S. dollar-denominated, high yield, and other income generating corporate bonds maturing in 2026. The fund seeks to meet its investment objective generally by investing in component securities of the index.

The index is composed of U.S. dollar-denominated, taxable, fixed-rate, high yield (which are considered below investment-grade) and BBB or equivalently rated corporate bonds scheduled to mature after December 31, 2025 and before December 16, 2026.

IBHF offers investors:

  1. An innovative means to higher income: Get exposure to a diversified universe of high yield and BBB-rated corporate bonds maturing between January 1, 2026 and December 15, 2026 in a single fund.
  2. Design like a bond, trading like a stock: Combine the defined maturity and regular income distribution characteristics of a bond with the transparency and tradability of a stock.
  3. Multiple features: Use the fund to seek higher income, build a bond ladder, and manage interest rate risk.

A Bond Laddering Tool

Funds like IBHF may not be in the spotlight like high-flying technology ETFs, but for financial advisors, these funds have their uses in fixed income strategies like bond laddering. The strategy involves buying bonds at varying maturity dates in order to hedge against changes in rates.

“These ETFs haven’t gotten much public attention, but they are used by many wirehouse financial advisors and RIAs, as well as some individual investors, according to Karen Schenone, head of iShares Fixed Income Strategy for BlackRock’s U.S. Wealth Advisory business. “iBonds ETFs are an ‘efficient way to build bond ladders at lower individual minimum’,” noted a ThinkAdvisor article. “Investors can buy a single share for about $25, allowing them to build bond ladders for far less than the typical $250,000 – $350,000 that many brokerages and advisory firms would require.”

“A lot of SMA platforms have $250,000 minimums for bond ladders but many retirement accounts may not meet those minimums,” Schenone said. She noted that many advisors are using investment-grade corporate iBond ETFs for retirement accounts, which do have required minimum distributions.

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