What is the underlying index that the IBHF ETF aims to track?

The IBHF ETF aims to track the performance of the Underlying Index, developed by Alerian, which represents a composite of North American energy infrastructure companies engaged in midstream activities, including gathering, processing, transportation, terminaling, and storage of energy commodities.

What types of companies are included in the IBHF ETF?

The IBHF ETF includes midstream energy companies, such as midstream MLPs (Master Limited Partnerships) and midstream corporations, that are involved in energy infrastructure activities in the United States or Canada. These companies are primarily focused on the transportation, storage, and processing of minerals and natural resources.

How does the IBHF ETF work?

The IBHF ETF operates on a passive management or indexing investment approach. It pools investors' money and invests at least 90% of its total assets in securities that comprise the Underlying Index. This strategy allows investors to gain exposure to the performance of North American energy infrastructure companies without directly holding individual stocks.

What are the advantages of investing in the IBHF ETF?

Investing in the IBHF ETF offers investors exposure to a diversified basket of North American energy infrastructure companies, including midstream MLPs and corporations. It simplifies access to the energy infrastructure sector, provides potential income from distributions, and avoids the direct tax complexities associated with investing in MLPs.

6 min read

By Beqa Bumbeishvili, ETF Insider

What is the IBHF ETF ?

In the world of finance and investment, exchange-traded funds (ETFs) have gained immense popularity as a convenient and diversified way to invest in various financial instruments. One such ETF that has garnered attention is the IBHF ETF. In this article, we will delve into the overview, underlying assets, benefits, and considerations before investing in the IBHF ETF.

IBHF ETF: Overview

The IBHF ETF, short for iShares iBonds 2026 Term High Yield and Income ETF, is a fixed maturity ETF offered by BlackRock, Inc. (BFA). As the name suggests, this ETF has a specific term, and it is designed to meet its investment objective by investing in component securities of the Bloomberg 2026 Term High Yield and Income Index, also known as the "Underlying Index." The IBHF ETF is set to terminate on or about December 15, 2026, at which point it will distribute its remaining net assets to its shareholders in accordance with a plan of liquidation.

IBHF ETF Underlying and Exposure: What Does It Track and How?

The Underlying Index, which serves as the benchmark for the IBHF ETF, is composed of U.S. dollar-denominated, taxable, fixed-rate, high yield (below investment-grade) and BBB or equivalently rated corporate bonds. These bonds are scheduled to mature between January 1, 2026, and December 15, 2026. The Index Provider, Bloomberg Index Services Limited, selects securities eligible for inclusion in the Underlying Index from a universe of corporate issuers, including industrial, financial institutions, and utilities. The IBHF ETF's underlying assets are chosen from two sub-indices, the Bloomberg U.S. High Yield Index (High Yield Index) and the Bloomberg U.S. Corporate Index (Corporate Index), both of which are stripped of securities maturing outside of the specified maturity range. Additionally, during the last 1.5 years but before the last 6 months of the ETF's term, the Underlying Index may introduce BBB-rated bonds as high yield bonds no longer qualify for inclusion or decline in value. The ETF also includes bonds with a clean price below $60 and must meet specific rating criteria to be selected for inclusion.

IBHF overlap What is the IBHF ETF ?

IBHF ETF: Benefits of Investing

Investing in the IBHF ETF offers several advantages to investors. Firstly, it provides exposure to a diversified portfolio of high-yield corporate bonds, which can offer attractive yields compared to traditional investment-grade bonds. Secondly, the ETF's fixed maturity date aligns with the term of the Underlying Index, which may be appealing to investors with specific investment time horizons or financial goals. Additionally, as an ETF, the IBHF provides liquidity and can be bought or sold on an exchange throughout the trading day, offering flexibility to investors.

IBHF ETF: Considerations Before Investing

While the IBHF ETF offers potential benefits, investors must carefully consider certain factors before investing. As the ETF focuses on high-yield bonds, it inherently carries higher credit risk compared to investment-grade bonds. The value of high-yield bonds can be more sensitive to changes in economic conditions and interest rates. Additionally, the ETF will be subject to issuer limits, with any excess redistributed among the remaining constituents on a pro-rata basis. It's essential for investors to assess their risk tolerance and investment objectives before including the IBHF ETF in their portfolio.

Conclusion:
In conclusion, the iShares iBonds 2026 Term High Yield and Income ETF (IBHF ETF) presents an opportunity for investors seeking exposure to a diversified portfolio of high-yield corporate bonds. With a fixed maturity date and a focus on the Bloomberg 2026 Term High Yield and Income Index, the ETF offers unique characteristics that may appeal to certain investors. However, like any investment, it comes with its own set of risks and considerations, and investors should conduct thorough research and consult with financial professionals before making any investment decisions.

Disclaimer: This article is for informational purposes only and does not provide any investment advisory services. Investing in ETFs and financial instruments involves risk, and individuals should carefully consider their financial situation and objectives before making any investment decisions.

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FAQ

What is the IBHF ETF?
The IBHF ETF, also known as the iShares North American Energy Infrastructure ETF, is an exchange-traded fund designed to track the performance of North American energy infrastructure companies engaged in midstream activities involving energy commodities.
What is the underlying index that the IBHF ETF aims to track?
The IBHF ETF aims to track the performance of the Underlying Index, developed by Alerian, which represents a composite of North American energy infrastructure companies engaged in midstream activities, including gathering, processing, transportation, terminaling, and storage of energy commodities.
What types of companies are included in the IBHF ETF?
The IBHF ETF includes midstream energy companies, such as midstream MLPs (Master Limited Partnerships) and midstream corporations, that are involved in energy infrastructure activities in the United States or Canada. These companies are primarily focused on the transportation, storage, and processing of minerals and natural resources.
How does the IBHF ETF work?
The IBHF ETF operates on a passive management or indexing investment approach. It pools investors' money and invests at least 90% of its total assets in securities that comprise the Underlying Index. This strategy allows investors to gain exposure to the performance of North American energy infrastructure companies without directly holding individual stocks.
What are the advantages of investing in the IBHF ETF?
Investing in the IBHF ETF offers investors exposure to a diversified basket of North American energy infrastructure companies, including midstream MLPs and corporations. It simplifies access to the energy infrastructure sector, provides potential income from distributions, and avoids the direct tax complexities associated with investing in MLPs.

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