A smart beta exchange traded fund, the Inspire Corporate Bond ETF (IBD) debuted on 07/10/2017, and offers broad exposure to the Investment Grade Corporate Bond ETFs category of the market.
What Are Smart Beta ETFs?
For a long time now, the ETF industry has been flooded with products based on market capitalization weighted indexes, which are designed to represent the broader market or a particular market segment.
A good option for investors who believe in market efficiency, market cap weighted indexes offer a low-cost, convenient, and transparent way of replicating market returns.
However, some investors believe in the possibility of beating the market through exceptional stock selection, and choose a different type of fund that tracks non-cap weighted strategies: smart beta.
Non-cap weighted indexes try to choose stocks that have a better chance of risk-return performance, which is based on specific fundamental characteristics, or a mix of other such characteristics.
While this space offers a number of choices to investors, including simplest equal-weighting, fundamental weighting and volatility/momentum based weighting methodologies, not all these strategies have been able to deliver superior results.
Fund Sponsor & Index
Because the fund has amassed over $331.38 million, this makes it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. IBD is managed by Inspire. IBD, before fees and expenses, seeks to match the performance of the Inspire Corporate Bond Impact Equal Weight Index.
The Inspire Corporate Bond Impact Equal Weight Index is comprised of 250 investment grade, intermediate term corporate bonds issued by some of the most inspiring large cap blue chip companies in the United States.
Cost & Other Expenses
Investors should also pay attention to an ETF's expense ratio. Lower cost products will produce better results than those with a higher cost, assuming all other metrics remain the same.
With one of the most expensive products in the space, this ETF has annual operating expenses of 0.44%.
It has a 12-month trailing dividend yield of 4.07%.
Sector Exposure and Top Holdings
Most ETFs are very transparent products, and disclose their holdings on a daily basis. ETFs also offer diversified exposure, which minimizes single stock risk, though it's still important for investors to research a fund's holdings.
Looking at individual holdings, Devon Energy Corp. 5.85 12/15/25 (25179MAV5) accounts for about 1.49% of total assets, followed by Alexandria Real Estate Equities Inc. 4.9 12/15/30 (015271AU3) and Trimble Inc 4.9 06/15/28 (896239AC4).
Its top 10 holdings account for approximately 14.64% of IBD's total assets under management.
Performance and Risk
Year-to-date, the Inspire Corporate Bond ETF return is roughly 3.88% so far, and is up about 7.94% over the last 12 months (as of 11/19/2024). IBD has traded between $22.83 and $24.29 in this past 52-week period.
IBD has a beta of 0.24 and standard deviation of 6.19% for the trailing three-year period. With about 251 holdings, it effectively diversifies company-specific risk.
Alternatives
Inspire Corporate Bond ETF is not a suitable option for investors seeking to outperform the Investment Grade Corporate Bond ETFs segment of the market. Instead, there are other ETFs in the space which investors should consider.
IShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index and the JPMorgan Nasdaq Equity Premium Income ETF (JEPQ) tracks ----------------------------------------. IShares ESG Aware MSCI USA ETF has $13.92 billion in assets, JPMorgan Nasdaq Equity Premium Income ETF has $18.42 billion. ESGU has an expense ratio of 0.15% and JEPQ charges 0.35%.
Investors looking for cheaper and lower-risk options should consider traditional market cap weighted ETFs that aim to match the returns of the Investment Grade Corporate Bond ETFs.
Bottom Line
To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.
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Get it free >>Inspire Corporate Bond ETF (IBD): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
JPMorgan Nasdaq Equity Premium Income ETF (JEPQ): ETF Research Reports
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
