6 min readBy Beqa Bumbeishvili ETF Insider
How does the IAGG ETF work?
The IAGG ETF is a specialized investment fund that focuses on a specific sector. This exchange-traded fund offers investors exposure to a range of companies in this sector.
BlackRock-advised fund of its kind, seeks to replicate the performance of the Bloomberg Global Aggregate ex USD 10% Issuer Capped (Hedged) Index. This index encompasses a diverse array of investment-grade bonds from both developed and emerging markets, excluding certain types of securities like USD-denominated bonds and private placements. With over 12,900 issues included as of October 31, 2023, the index is weighted by market capitalization with a 10% cap on each issuer. Managed by BlackRock Financial Advisors (BFA), the fund follows an indexing strategy, investing primarily in a representative sample of securities from the underlying index, aiming to mirror its performance rather than outperform it. This approach reduces active management risks and aims for lower costs and tax-efficient returns. Additionally, the fund employs hedging strategies, utilizing foreign currency forward contracts, including non-deliverable forward contracts, to mitigate currency fluctuations. While the fund concentrates its investments in line with the industry concentrations of the underlying index, it also adheres to regulations, particularly those set by the Commodity Futures Trading Commission (CFTC) due to its use of futures, options, and swaps.
The IAGG Dividend seeks to provide investors with income by tracking the performance of the Bloomberg Global Aggregate ex USD 10% Issuer Capped (Hedged) Index. This index comprises a wide range of investment-grade bonds from various regions and sectors, excluding certain securities like USD-denominated bonds and private placements. Managed by BlackRock Financial Advisors (BFA), the fund adopts an indexing strategy, investing primarily in a representative sample of securities from the underlying index to replicate its performance. As a dividend-focused fund, IAGG Dividend aims to generate regular income for investors through dividends paid by the bonds within the index. While the fund aims to minimize risks through diversification and hedging strategies, it also adheres to regulatory requirements, including those set by the Commodity Futures Trading Commission (CFTC) due to its use of futures, options, and swaps.
The IAGG Tracking fund is designed to closely mirror the performance of the Bloomberg Global Aggregate ex USD 10% Issuer Capped (Hedged) Index, providing investors with an opportunity for passive investment in the global investment-grade bond market. Managed by BlackRock Financial Advisors (BFA), the fund employs an indexing approach, investing primarily in a representative sample of securities from the underlying index. By tracking the index, IAGG Tracking aims to replicate its investment results before fees and expenses. This strategy aims to offer investors exposure to a diversified portfolio of investment-grade bonds from both developed and emerging markets while minimizing the risks associated with active management. Additionally, the fund utilizes hedging strategies, including foreign currency forward contracts, to mitigate currency risks associated with non-U.S. dollar denominated securities within the index. As such, IAGG Tracking provides investors with a convenient and cost-effective way to gain exposure to the global bond market while aiming to closely track the performance of its benchmark index.
The IAGG Correlation fund is structured to maintain a close correlation with the performance of the Bloomberg Global Aggregate ex USD 10% Issuer Capped (Hedged) Index, offering investors a reliable tool for tracking the global investment-grade bond market. Managed by BlackRock Financial Advisors (BFA), this fund adopts a disciplined approach, investing primarily in a representative sample of securities from the underlying index. By closely aligning its investment strategy with the index, IAGG Correlation aims to replicate its performance before accounting for fees and expenses. This correlation strategy helps investors achieve a high degree of consistency in returns compared to the benchmark, minimizing tracking errors. Additionally, the fund employs hedging techniques, such as foreign currency forward contracts, to manage currency risks associated with non-U.S. dollar-denominated securities within the index. In summary, IAGG Correlation offers investors a reliable vehicle to participate in the global investment-grade bond market while maintaining a strong correlation with its benchmark index.
The IAGG Sector fund is structured to provide investors with exposure to specific sectors within the global investment-grade bond market while tracking the performance of the Bloomberg Global Aggregate ex USD 10% Issuer Capped (Hedged) Index. Managed by BlackRock Financial Advisors (BFA), this fund focuses on investing in bonds from selected sectors represented within the underlying index. By targeting specific sectors, such as government-related debt, corporate bonds, and securitized bonds, IAGG Sector aims to offer investors the opportunity to tailor their bond investments according to sector preferences or market outlooks. Through an indexing approach, the fund seeks to replicate the performance of its benchmark index, before accounting for fees and expenses. Additionally, IAGG Sector may utilize hedging strategies, including foreign currency forward contracts, to mitigate currency risks associated with non-U.S. dollar-denominated securities within the selected sectors. Overall, IAGG Sector provides investors with a targeted investment option within the global investment-grade bond market, allowing them to focus on specific sectors while closely tracking the performance of its benchmark index.
The IAGG Exposure fund, as a component of the First BlackRock-advised Funds, is meticulously crafted to provide investors with precise exposure to selected segments of the global investment-grade bond market while tracking the Bloomberg Global Aggregate ex USD 10% Issuer Capped (Hedged) Index. With a focus on capturing specific exposures within sovereign, government-related, corporate, and securitized bonds from both developed and emerging market issuers, the fund employs a sophisticated exposure-based indexing strategy. By strategically allocating assets to target specific exposures such as duration, credit quality, geographic regions, or other factors, the fund aims to replicate the exposure profile of the underlying index. Through this approach, investors can tailor their bond investments to align with their risk preferences, investment objectives, and market outlooks. Additionally, the fund maintains adherence to industry concentration policies similar to those of the Underlying Index, ensuring a balanced exposure across various segments of the global bond market and providing investors with a tool to precisely manage their bond portfolio exposures.
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