Morningstar - Fall 2019 - 54

Strategies

Protection Against Rising Rates
This fund's exposure to the banking sector is a risk, however.

BEST IDEAS: PASSIVE

Ben Johnson

IShares Floating Rate Bond ETF FLOT

This article is adapted from the ETF's Morningstar Global Fund Report dated
June 30, 2019.

Stats 06/30/2019

Ben Johnson, CFA, is director of global exchange-traded fund research with Morningstar
Research Services. He is a member of the editorial board of Morningstar magazine.

5-Yr Annlzd Return
1.44%

5-Yr % Rank in Cat
34

Morningstar Pillars 06/30/2019
Process
∞ Positive

Performance
∞ Positive

People
∞ Positive

$11.0K
10.68
10.5810.5

10.0

Morningstar US Short Core Bond

9.5
07/2016

07/2017

07/2018
Morningstar Ratings 06/30/2019

Morningstar Style Box 02/28/2019
Interest-Rate Sensitivity

Mstar
Period Return

Ltd

Mod

Mstar
Risk

Mstar
Rating

3-Yr

Above Avg Above Avg QQQQ

5-Yr

Above Avg Average

QQQ

10-Yr

QQQ

Overall Rating

Ext

Top 5 Regions 02/28/2019

Region

■ Fund

AAA

❙ Category Average

14.84

12.37

BBB

45.68
22.56
45.12

20.25
14.29

BBB

17.40

0 1.47

Morningstar Fall 2019

Price
∞ Positive

iShares Floating Rate Bond ETF

Parent
∞ Positive

Growth of 10K 06/30/2019

Credit Quality

BlackRock BLK, which manages this fund, has produced a solid index-tracking
record. From its June 2011 inception through May, the fund annually
trailed its index by 0.22%, a shade above its 0.2% fee. The fund's corporate
holdings have helped it outpace the category average. The fund's
since-inception return through May of 1.31% bested the category mean by
0.23%. Its risk-adjusted return, measured by the Sharpe ratio, also came
out ahead of the category over the same period. K

Category Average Expense
0.50%

High

More than half of the portfolio is dedicated to the financials sector, up
from less than 25% five years ago. This concentration is a source of risk, mostly
driven by large U.S. banks. Since 2010, these firms have issued a record
amount of debt to take advantage of low rates and meet the strict postcrisis
capital requirements.

Expense Ratio
0.20%

Mid

The fund tracks the Bloomberg Barclays U.S. Floating Rate Note < 5 Years Index,
which offers market-value-weighted exposure to investment-grade, variableinterest-rate bonds with less than five years until maturity. These bonds
tie their coupon payments to three-month Libor. So, when rates rise, they offer
higher coupon payments, and their prices don't fall as much as fixed-rate
bonds. In contrast, most funds in the ultrashort-bond Morningstar Category
invest in fixed-rate corporate and government bonds with less than three
years remaining until maturity. The fund effectively protects against rising rates,
but it does take moderate credit risk and loses out when rates fall.

Morningstar Category
Ultrashort Bond

Low

IShares Floating Rate Bond ETF FLOT has a significant cost advantage over
its ultrashort-bond and variable-rate mandate peers. The fund's benchmark allows investors to obtain exposure to the opportunity set in this market
segment in a cost-efficient manner. These factors underpin the fund's
Morningstar Analyst Rating of Bronze.

Morningstar Analyst Rating
´

Morningstar - Fall 2019

Table of Contents for the Digital Edition of Morningstar - Fall 2019