Best Investment Grade Corporate Bond ETFs for Q2 2022

BSCN, IBDN, and LQDI are Q2 2022’s best investment grade corporate bond ETFs

Exchange-traded funds (ETFs) are not reserved solely for equities. There are also bond ETFs that invest exclusively in fixed-income securities. Investors who want to access relatively low-risk corporate bonds can consider investment grade corporate bond ETFs, which buy the high-quality debt of financially strong and stable companies. Examples of the kinds of companies whose bonds are included in these ETFs include Verizon Communications Inc. (VZ), Goldman Sachs Group Inc. (GS), and Wells Fargo & Co. (WFC). These companies have high credit ratings, suggesting a low risk of default. For this reason, these ETFs can provide a strong defensive addition to investment portfolios.

Key Takeaways

  • The investment grade corporate bond sector dramatically underperformed the broad U.S. equity market over the past year.
  • The best investment grade corporate bond ETFs for the second quarter (Q2) of 2022 are BSCN, IBDN, and LQDI.
  • The top holdings of the first two funds include bonds issued by Apple Inc. and Wells Fargo & Co., respectively, while the top holding of the third fund is shares of the iShares iBoxx $ Investment Grade Corporate Bond ETF.

There are 61 distinct investment grade corporate bond ETFs that trade in the United States, excluding inverse and leveraged ETFs as well as funds with less than $50 million in assets under management (AUM). The investment grade corporate bond sector, as measured by the Bloomberg U.S. Corporate Bond Index, has significantly underperformed the broad U.S. equity market over the past 12 months, with a total return of -5.3% compared with the S&P 500’s total return of 16.8%, as of Feb. 10, 2022. The best-performing investment grade corporate bond ETF for the second quarter (Q2) of 2022, based on performance over the past year, is the Invesco BulletShares 2023 Corporate Bond ETF (BSCN). We examine the three best investment grade corporate bond ETFs below. All numbers are as of Feb. 10, 2022.

Invesco BulletShares 2023 Corporate Bond ETF (BSCN)

  • Performance Over One-Year: 25.7%
  • Expense Ratio: 0.10%
  • Annual Dividend Yield: 1.68%
  • Three-Month Average Daily Volume: 446,498
  • Assets Under Management: $2.3 billion
  • Inception Date: Sept. 17, 2014
  • Issuer: Invesco

NSCN tracks the Nasdaq Bulletshares USD Corporate Bond 2023 Index, which is designed to measure the performance of a portfolio of U.S. dollar-denominated investment grade corporate bonds with maturities or effective maturities in 2023. The fund uses a "sampling" methodology to invest in at least 80% of corporate bonds that comprise the index. Corporate bonds of financials, healthcare, and consumer discretionary companies make up the three largest portions of the portfolio. BulletShares funds are unique in that they distribute principal back to investors once the scheduled maturity date is reached. The top holdings of NSCN are bonds issued by Apple Inc. (AAPL), which sells personal computers, mobile hardware devices, and services; Bank of America Corp. (BAC), a major financial services company; and Boeing Co. (BA), an aerospace company.

iShares iBonds Dec. 2022 Term Corporate ETF (IBDN)

  • Performance Over One-Year: 0.1%
  • Expense Ratio: 0.10%
  • Annual Dividend Yield: 1.92%
  • Three-Month Average Daily Volume: 294,511
  • Assets Under Management: $1.6 billion
  • Inception Date: March 10, 2015
  • Issuer: BlackRock Financial Management

IBDN tracks the benchmark Bloomberg December 2022 Maturity Corporate Index. The index is comprised of U.S. dollar-denominated, investment-grade corporate bonds maturing between Jan. 1, 2022 and Dec. 15, 2022. More than 27% of IBDN's portfolio is made up of bonds of banks, with consumer non-cyclical company bonds the second-largest holding. The top holdings of IBDN include bonds of Wells Fargo & Co. (WFC), a financial services company; Oracle Corp. (ORCL), a software and computer technology company; and AbbVie Inc. (ABBV), a biopharmaceutical company.

iShares Inflation Hedged Corporate Bond ETF (LQDI)

  • Performance Over One-Year: -6.8%
  • Expense Ratio: 0.18%
  • Annual Dividend Yield: 2.32%
  • Three-Month Average Daily Volume: 62,258
  • Assets Under Management: $120.8 million
  • Inception Date: May 8, 2018
  • Issuer: BlackRock Financial Management

LQDH tracks the BlackRock Inflation Hedged Corporate Bond Index, which is designed to mitigate the inflation risk of a portfolio composed of U.S. dollar-denominated, investment grade corporate bonds. To facilitate this strategy, LQDH holds both shares of the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD), which comprises 93.5% of the portfolio, and positions in inflation swaps. Through its LQD investment, LQDH's holdings are weighted most heavily toward banking, consumer non-cyclical, and communications company bonds. Bonds with more than 20 years until maturity receive the largest allocation, at more than 27.3% of the portfolio.As mentioned, LQDH does not hold individual corporate bonds, but gains exposure to an array of corporate bonds from its investment in the iShares iBoxx $ Investment Grade Corporate Bond ETF.

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Article Sources

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  2. ETF Database. “ETF Screener.” Accessed Feb. 12, 2022.

  3. Invesco. "Invesco BulletShares 2023 Corporate Bond ETF." Accessed Feb. 12, 2022.

  4. ETF Database. "NSCN: Invesco BulletShares 2023 Corporate Bond ETF." Accessed Feb. 12, 2022.

  5. iShares. "iShares® iBonds® Dec 2022 Term Corporate ETF." Accessed Feb. 12, 2022.

  6. ETF Database. "IBDN: iShares iBonds Dec 2022 Term Corporate ETF." Accessed Feb. 12, 2022.

  7. iShares. "iShares Inflation Hedged Corporate Bond ETF." Accessed Feb. 12, 2022.

  8. ETF Database. "iShares Inflation Hedged Corporate Bond ETF." Accessed Feb. 12, 2022.

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