Even though this is a more than $34 billion fund and the largest “Investment Grade Corporate Bond” ETF in the U.S. listed landscape, a $1 billion flow is large for the name, especially given current price/yield levels.
The yield in LQD has fallen as low as 3.21%, given the recent rally in U.S. Fixed Income, and the name resonates with us today especially since we just covered the “Consumer Staples” equity sector in this piece yesterday in terms of XLP (SPDR Consumer Staples Select, Expense Ratio 0.14%). As one might imagine, bonds issued by well-known “Consumer Staples” companies are present within the LQD portfolio, including several of the highest weighted issues in the index, which are from Anheuser-Busch Inbev (BUD).
There 1,781 individual holdings with the portfolio, all categorized as “Investment Grade” bonds denominated in U.S. dollars. Other prominent issuers within LQD include VZ, JPM, T, GS, BAC, MSFT, WFC, MS, AAPL, and C to name some of the largest presences.
From a sector standpoint, “Banking” makes up over 27.2% of the portfolio, while Consumer Staples as we had mentioned, is the second largest sector component at just shy of 17% (16.98%). Other sectors with notable weightings include Communications (12.33%), Technology (11.01%), and Energy (9.99%).
LQD is not the only fund in this space that we are watching here given the present appetite evident from recent creation flows. Vanguard’s VCSH (Vanguard Short-Term Corporate Bond, Expense Ratio 0.07%, $18.9 billion in AUM) and VCIT (Vanguard Intermediate-Term Corporate Bond, Expense Ratio 0.07%, $14.3 billion in AUM) are the second and third largest funds in the segment, and there are several other funds above the $5 billion mark in terms of overall assets in the space that are worth watching here in the near term as well. These include the $11.6 billion CSJ (iShares 1-3 Year Credit Bond, Expense Ratio 0.20%) and CIU (iShares Intermediate Credit Bond, Expense Ratio 0.20%, $7 billion in AUM).
The iShares IBoxx $ Investment Grade Corporate Bond Fund (NYSE:LQD) was trading at $120.41 per share on Wednesday afternoon, down $0.12 (-0.10%). Year-to-date, LQD has gained 2.76%, versus a 8.84% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.