iShares Corporate Bond Index: August 2025 fund update

• BlackRock, a pioneer in index investing, has a great record of managing index funds

• We view this fund as a good option to get access to a broad spread of sterling corporate bonds

• It’s closely tracked the iBoxx Sterling Non-Gilts Index since launch in 2010

• This fund currently features on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The iShares Corporate Bond Index fund offers a way to invest broadly across the sterling corporate bond market. As well as corporate bonds, the fund invests in bonds issued in Sterling by governments, government agencies and supranationals, but excludes gilts which are bonds issued by the UK government.

An index fund is one of the simplest methods of investing, and we think this fund could be a great, low-cost addition to an investment portfolio. Bonds can be a useful way to help diversify a portfolio focused on shares or other assets, or a more conservative portfolio in need of some income.

Manager

This fund is managed by BlackRock’s Fixed Income Index team, which is led by John Hutson. Hutson has been at BlackRock for 14 years and has 24 years of experience in total. He previously had responsibility for Credit Index Investments within the team.

While Hutson leads the team, each index fund at BlackRock has a primary and secondary manager, though in practice the broader team helps to manage each fund. Divya Manek is the Head of Investment Grade Credit and Emerging Market Debt at BlackRock and the lead portfolio manager on this fund.

BlackRock also has other teams that trade shares and bonds based across the world. The teams function in different time zones, which means they have access to timely information, and can provide input on market trends and corporate actions. Their global approach helps drive efficient management of their funds, while providing simple and effective tracking options for investors.

Process

This fund aims to track the performance of the broader corporate bond market, as measured by the iBoxx Sterling Non-Gilts Index. It invests in almost every bond in the index. This is known as partial replication, which could help the fund track the index closely without incurring the cost of holding every bond. Bonds that make up a very small part of the index can be more difficult or expensive to buy and sell.

The fund invests in around 1,250 bonds. While it mainly holds investment grade bonds, meaning they have a credit rating of at least BBB, it can hold some high-yield bonds at times, which increases risk.

In any index tracker fund, factors like taxes, dealing commissions and spreads, and the cost of running the fund all drag on performance. To reduce the tracking difference between the fund and the index, BlackRock cross trades bonds internally across all its own funds. This helps to reduce transaction costs.

The fund can lend some of its investments to others in exchange for a fee in a process known as stock lending. This offsets some of the costs involved with running the fund. Since BlackRock’s lending program started in 1981, only three borrowers with active loans have defaulted. In each case, BlackRock was able to repurchase every security out on loan with collateral on hand and without any losses to their clients. Even so, stock lending adds risk.

Culture

BlackRock is currently the largest asset manager in the world, managing $12.5trn of assets globally. The company was founded by eight partners including current CEO Larry Fink and is known for both active and passive strategies. Employees at BlackRock are encouraged to hold shares in the company so that they are engaged with helping the company perform well and grow. The iShares brand represents BlackRock's family of index tracking and exchange-traded funds.

As the world's largest asset manager, and with lots of resource and knowledge under its belt, BlackRock benefits from unique access to the marketplace, which can help reduce trading costs. BlackRock is also a pioneer in the passive investment space and has a track record of innovation in this part of the investment market.

The team running this fund also works closely with various fixed income and risk departments across the business. We believe this adds good support and challenge on how to run the fund effectively.

ESG Integration

BlackRock was an early signatory to the Principles for Responsible Investment (PRI) and has offered Environmental, Social and Governance (ESG)-focused funds for several years, including through its iShares range of passive products. But it only made a company-wide commitment to ESG in January 2020. Following that announcement, the company promised to expand its range of ESG-focused ETFs, screen some thermal coal companies out from its actively managed funds and require all fund managers to consider ESG risks.

BlackRock’s Investment Stewardship Team aims to vote at 100% of meetings where it has the authority to do so. The Investment Stewardship team engages with companies, in conjunction with fund managers, and the results of proxy votes can be found on the BlackRock website’s ‘proxy voting search’ function.

BlackRock has courted controversy in recent years for failing to put its significant weight behind shareholder resolutions aimed at tackling climate change. It responded by committing to be more transparent on its voting activity and providing rationales for key votes.

BlackRock raised further concerns in 2022 when it indicated it might support fewer shareholder proposals based on environmental and social issues in the future. But its support for shareholder resolutions has fallen dramatically, from 40% in 2021 to just 4% in 2024. BlackRock argues that many of the resolutions were overreaching, lacked economic merit or didn’t promote long-term shareholder value, but this reasoning has been met with some scepticism.

In 2024, BlackRock announced that its US arm would step back from the Climate Action 100+ collective engagement initiative, citing legal considerations, although it suggested its international arm would remain a member.

iShares Corporate Bond Index is a passive fund designed to track an index that doesn’t specifically integrate ESG analysis or exclude bonds issued by companies in certain industries, like those involved in weapons or tobacco.

Cost

The fund usually has an annual ongoing charge of 0.11%, but with a 0.04% saving it’s available to HL clients for 0.07%. We believe this is good value when compared with other sterling corporate bond tracker funds on the HL platform. Our platform charge of up to 0.45% per annum also applies, except in the HL Junior ISA, where no platform charge applies.

Performance

Since launch in June 2010, the fund has done a good job of tracking its benchmark. During that time, the fund has returned 64.24%*. As is typical of index funds, it’s lagged the benchmark over the long term because of the costs involved in running the fund. However, the tools used by the managers have helped to keep performance tight to the index.

Over the past 12 months, the fund has tracked the iBoxx Sterling Non-Gilts Index closely, gaining 4.06%. Remember, past performance isn’t a guide to future returns.

With inflation falling closer to the 2% target, the Bank of England (BoE) lowered interest rates in August 2024 after holding rates at a 16 year high for a full year. Usually, when interest rates are cut, bond yields fall, and prices rise.

But bond yields increased at the end of the year, and prices fell, even though the BoE continued to lower rates. This was driven by the view that Trump’s policies, especially on tariffs, have the potential to disrupt trade and push inflation higher. Bond markets moved as a result to expect fewer interest rate cuts.

So far in 2025, bond markets have been volatile due to the unknown impact of Trump’s tariffs and inflation remaining above target. Interest rate cuts are still expected but the BoE is taking a gradual approach.

At the end of July 2025, the fund’s yield was 5.09%. Yields aren’t guaranteed and shouldn’t be considered a reliable indicator of future income.

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.

The period between 31 July 2020 and 31 July 2022 reflects the performance of the H Class version of the fund. Performance from 31 July 2022 onwards reflects the performance of the S Class version of the fund. This is due to when each share class was launched.