What you need to know about bond indexing

Bond index funds and index-tracking ETFs are managed by fixed income professionals who use human expertise and technology to intelligently pursue the fund’s objectives.

iShares bond ETFs are managed by teams of fixed income professionals who have deep trading and portfolio management experience.

BlackRock portfolio managers use a sampling approach, where only the bonds that they believe will best track the performance of the index are selected, and those that they believe may harm the fund’s returns are left out. This approach does not require holding every bond in the index.

Portfolio managers strive to balance the ability of the ETF to track its index with the potential costs of managing a large portfolio of bonds. Moreover, they continually evolve the portfolios throughout the month as opposed to rebalancing on a single day at month end.

This flexible investment process allows iShares bond ETFs to avoid pitfalls like buying bonds right before defaults or downgrades, or even participate in new issuance.

Ultimately, the combination of human investment expertise and technological innovation allows iShares bond ETF portfolio management teams to pursue the fund’s objective in the investor’s best interest.

Bond indexing investment process

It's a process that blends human expertise and technology to intelligently pursue the fund’s objective.

Index portfolio managers have flexibility to:

Chart: Bond indexing investment process

A basis point is one hundredth of one percent (e.g. one basis point = 0.01%).
Source: BlackRock. For illustrative purposes only.