Morningstar - Q2 2023 - 54

Strategies
Low Cost, Well Diversified
IShares JPMorgan USD Emerging Markets Bond ETF is set up
for success in its market.
Lan Anh Tran
BEST IDEAS: PASSIVE
This article is adapted from the ETF's Morningstar Global Fund Report dated
March 29, 2023.
IShares JPMorgan USD Emerging Markets Bond ETF EMB is a standout option
in the emerging-markets bond Morningstar Category thanks to its broadly
diversified portfolio and low fee. It earns a Morningstar Analyst Rating of Silver.
The fund tracks the JPMorgan EMBI Global Core Index, which sweeps in
debt issued by emerging-markets sovereign and quasi-sovereign entities
denominated in U.S. dollars. The index includes bonds with at least 2.5 years
until maturity and at least $1 billion in outstanding face value. This limits
its exposure to less liquid bonds and bonds closer to maturity, which can help
limit its transaction costs. Country exposures are based on market value, but
the index redistributes weights from countries with higher debt to countries
with lower debt. This diversifies the portfolio geographically and alleviates
country-specific risk. The resulting portfolio stays in the more liquid portion of
the market while still reflecting the opportunity set in this space.
Higher yields from emerging-markets bonds often come with greater credit
risk. While the fund tends toward the higher-quality side of emerging markets,
it is also exposed to countries with below-investment-grade credit ratings. As
of February 2023, the funds invested around 54% of its assets in investmentgrade
bonds, mostly bonds rated BBB. Its high-yield stake often concentrates in
the higher rungs of junk bonds, resulting in a more conservative credit risk
profile than its average category peer.
This portfolio courts more interest-rate risk than most category peers. At the
end of February 2023, the fund's average effective duration was more
than 2.0 years longer than the category average. This could be a headwind
for the fund when interest rates are rising.
Credit Quality Breakdown 01/31/2023
Controlling costs is vital to success in this corner of the market. The strategy's
liquidity screens and market-value weighting effectively limit transaction
costs. The fund's low fee also offers a durable advantage over pricier funds in
the category. It boasts an expense ratio of 0.39%, which is about 60 basis
points less than its average peer. K
Lan Anh Tran is a manager research analyst at Morningstar Research Services LLC.
AA
4.23
0%
54
Morningstar Q2 2023
■ Fund ❙ Category Average
BBB
BB
B
A
27.86 29.48
23.07
15.88
9.10
8.56
10
17.03
20
30
20.66
25.85
IShares JPMorgan USD Emerging Markets Bond ETF EMB
Stats 03/31/2023
Morningstar Analyst Rating
„
Total Assets
$14.6 Billion
Process
Above Average
Growth of 10K 03/31/2023
$13K
12
10
11
9
04/2020
04/2021
Morningstar Style Box 03/31/2023
Ltd
Mod
Ext
Snapshot as
of most recent
portfolio.
04/2022
Morningstar Ratings 03/31/2023
Period
3-Yr
5-Yr
10-Yr
Mstar
Return
Mstar
Risk
Mstar
Rating
Below Avg Average QQ
Average Average QQQ
Average Below Avg QQQ
Overall Rating
QQQ
Morningstar
Emerging
Markets Bond
10.04
iShares JP Morgan
USD Emerging
Markets Bond ETF
9.96
Morningstar Category
Emerging Markets Bond
10-Yr Annlzd Return
1.45%
Morningstar Pillars 03/31/2023
People
Above Average
Parent
Above Average
Expense Ratio
0.39%
10-Yr % Rank in Cat
35
Low
Mid
High
https://www.morningstar.com/etfs/xnas/emb/quote https://www.morningstar.com/authors/2404/lan-anh-tran
Morningstar - Q2 2023

Table of Contents for the Digital Edition of Morningstar - Q2 2023
