- BlackRock, a pioneer in index investing, has a great record of managing tracker funds
- We view this fund as a good option to get access to a broad spread of sterling (UK) corporate bonds
- The fund has closely tracked its index since it launched in 2010
How it fits in a portfolio
This fund offers a simple way to invest broadly across the UK corporate bond market. Bonds can be a great way to diversify a portfolio focused on shares or other assets, or a more conservative portfolio in need of some income.
Duncan Fergusson has managed this fund since launch in 2010, and is a member of BlackRock's Fixed Income Portfolio Management Group. Fergusson previously joined Barclays Global Investors in 2003, which merged with BlackRock in 2009. The wider team at BlackRock, which also helps to run the fund, is very well-resourced and experienced in index investing. The company has a long history of running index tracker funds, and previously acquired the firm that set up the industry's first tracker fund in 1971.
The fund aims to provide broad exposure to the UK corporate bond market by closely tracking the performance of the Markit iBoxx GBP Non-Gilts index. It's currently made up of around 1,200 bonds and is focused towards sectors such as financials and industrials.
The fund invests in almost every bond in the index. This is known as partial replication, which could help the fund track the index closely without the cost of holding every bond in it. Bonds that make up a very small part of the index are sometimes not held in the fund as they can be more difficult or expensive to buy and sell. The team also sometimes invests in bonds that don’t feature in the index but perform similarly to it. This is called stratified sampling. The fund can also lend some of its investments to third-parties in exchange for a fee which helps to keep costs lower.
The iShares brand represents BlackRock's family of index tracking and exchange-traded funds. The group is a pioneer in index investing and has remained committed to building this part of the business. Over the years the company has continued to innovate and now offers a large number of index tracker funds covering a wide range of geographies, sectors, and markets.
As part of one of the world's largest asset managers, iShares benefits from lots of resources and knowledge. And it aims to continue to drive further development in this part of the investment market. Being such a large player in the index tracking arena gives BlackRock unique access to the marketplace, which can help reduce trading costs.
The fund is available for an annual ongoing charge of 0.12%. We think this is great value for a corporate bond tracker option run by a provider we rate highly. Our platform charge of up to 0.45% per year also applies.
The fund has tracked the Markit iBoxx Sterling Non Gilts index well since its launch in 2010. It’s tracked the index closely over shorter periods too, although over the long term it’s fallen behind the benchmark. This is to be expected from any index fund though, when you take into account the costs involved.
Given BlackRock's size, experience and expertise running index tracker funds, we expect the fund to continue to track the index well in future, though there are no guarantees how it will perform. All investments fall as well as rise in value, so you could get back less than you invest.
In some years the fund has tracked the index closer than others, as you can see in the five year performance table below. On occasion it has even ended up slightly ahead of the index due to the strategies used by the team, although this won't necessarily happen in future and isn’t an aim of the fund.
|Annual percentage growth|
| Apr 15 -
| Apr 16 -
| Apr 17 -
| Apr 18 -
| Apr 19 -
|iShares Corporate Bond Index||1.7%||9.3%||0.8%||3.7%||6.3%|
|Markit iBoxx Sterling Non Gilts Overall||2.5%||9.6%||0.6%||3.6%||6.4%|
Past performance is not a guide to the future. Source: Lipper IM to 30/04/2020.