Is Inspire Corporate Bond ETF (IBD) a Strong ETF Right Now?
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?
Market cap weighted indexes were created to reflect the market, or a specific segment of the market, and the ETF industry has traditionally been dominated by products based on this strategy.
Because market cap weighted indexes provide a low-cost, convenient, and transparent way of replicating market returns, they work well for investors who believe in market efficiency.
But, there are some investors who would rather invest in smart beta funds; these funds track non-cap weighted strategies, and are a strong option for those who prefer choosing great stocks in order to beat the market.
Based on specific fundamental characteristics, or a combination of such, these indexes attempt to pick stocks that have a better chance of risk-return performance.
Even though this space provides many choices to investors--think one of the simplest methodologies like equal-weighting and more complicated ones like fundamental and volatility/momentum based weighting--not all have been able to deliver first-rate results.
Fund Sponsor & Index
Because the fund has amassed over $255.58 million, this makes it one of the average sized ETFs in the Investment Grade Corporate Bond ETFs. IBD is managed by Inspire. Before fees and expenses, this particular fund 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
When considering an ETF's total return, expense ratios are an important factor. And, cheaper funds can significantly outperform their more expensive cousins in the long term if all other factors remain equal.
Annual operating expenses for IBD are 0.45%, which makes it one of the most expensive products in the space.
IBD's 12-month trailing dividend yield is 2.98%.
Sector Exposure and Top Holdings
ETFs offer diversified exposure and thus minimize single stock risk, but it is still important to delve into a fund's holdings before investing. Most ETFs are very transparent products and many disclose their holdings on a daily basis.
Looking at individual holdings, Vanecketftrustsweepvehicle accounts for about 2.38% of total assets, followed by Lennarcorp.47/812/15/23 and Williamscosinc41/211/15/23.
IBD's top 10 holdings account for about 14.78% of its total assets under management.
Performance and Risk
The ETF has added about 1.27% and is up roughly 1.47% so far this year and in the past one year (as of 09/07/2023), respectively. IBD has traded between $22.24 and $23.65 during this last 52-week period.
The ETF has a beta of 0.18 and standard deviation of 5.16% for the trailing three-year period. With about 249 holdings, it effectively diversifies company-specific risk.
Alternatives
Inspire Corporate Bond ETF is a reasonable option for investors seeking to outperform the Investment Grade Corporate Bond ETFs segment of the market. However, there are other ETFs in the space which investors could consider.
IShares ESG Aware MSCI EAFE ETF (ESGD) tracks MSCI EAFE ESG Focus Index and the iShares ESG Aware MSCI USA ETF (ESGU) tracks MSCI USA ESG Focus Index. IShares ESG Aware MSCI EAFE ETF has $7.20 billion in assets, iShares ESG Aware MSCI USA ETF has $12.71 billion. ESGD has an expense ratio of 0.20% and ESGU charges 0.15%.
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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Inspire Corporate Bond ETF (IBD): ETF Research Reports
iShares ESG Aware MSCI EAFE ETF (ESGD): ETF Research Reports
iShares ESG Aware MSCI USA ETF (ESGU): ETF Research Reports
