Exchange-traded funds (ETFs) are not reserved solely for equities. There are also bond ETFs that invest exclusively in fixed-income securities. This universe includes investment grade corporate bond ETFs, which buy the high quality debt of financially strong and stable companies. Some examples include Microsoft Corp. (MSFT), AT&T Inc. (T), and JPMorgan Chase & Co. (JPM). These companies have high credit ratings that indicate a low risk of default. For this reason, these ETFs can provide a strong defensive addition to investment portfolios.
The investment grade corporate bond ETF universe is comprised of about 34 distinct ETFs, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The best performing investment grade corporate bond ETF for Q3 2020, based on performance over the past year, is the iShares Long-Term Corporate Bond ETF (IGLB). We examine the top 3 investment grade corporate bond ETFs below. All numbers in this story are as of May 12, 2020.
- Performance over 1-Year: 11.9%
- Expense Ratio: 0.06%
- Annual Dividend Yield: 3.83%
- 3-Month Average Daily Volume: 447,181
- Assets Under Management: $1.8 billion
- Inception Date: December 8, 2009
- Issuing Company: iShares
The iShares Long-Term Corporate Bond ETF tracks the ICE BofAML10+ Year US Corporate Index. The fund invests in U.S. dollar-denominated bonds with maturities of more than 10 years. The ETF has holdings in hundreds of companies. The fund's top holdings include bonds of Anheuser-Busch Companies LLC (BUD), the brewing company; bonds of GE Capital International Funding Company Unlimited Co., a subsidiary of General Electric Co. (GE); and bonds of CVS Health Corp. (CVS), the healthcare company.
- Performance over 1-Year: 11.2%
- Expense Ratio: 0.07%
- Annual Dividend Yield: 3.71%
- 3-Month Average Daily Volume: 956,217
- Assets Under Management: $669.7 million
- Inception Date: March 10, 2009
- Issuing Company: State Street SPDR
SPLB is a bond ETF that invests in U.S. investment grade corporate bonds with durations greater than ten years. This fund tracks the Bloomberg Barclays Long U.S. Corporate Index. The top three positions in SPLB include bonds of Verizon Communications Inc. (VZ), the telecommunications conglomerate; bonds of CVS Health; and bonds of GE Capital International Funding Company.
- Performance over 1-Year: 11.0%
- Expense Ratio: 0.05%
- Annual Dividend Yield: 3.59%
- 3-Month Average Daily Volume: 935,956
- Assets Under Management: $3.6 billion
- Inception Date: November 23, 2009
- Issuing Company: Vanguard
The Vanguard Long-Term Corporate Bond ETF invests in investment grade corporate bonds on the long end of the maturity spectrum. It tracks the Barclays U.S. 10+ Year Corporate Index and provides investors with moderate credit risk. The top holdings are bonds of Microsoft Corp. (MSFT), the technology giant; bonds of Anthem, Inc. (ANTM), the health insurance company; and bonds of Bristol-Myers Squibb Co. (BMY), the pharmaceutical company.