It’s been a tumultuous period for corporate bond ETFs investors, especially with a wave of defaults and downgrades expected due to the impacts of the Covid-19 pandemic. But some funds have exceeded their peers in their ability to offer durable long-term returns.
The top 10 ETFs in the combined corporate bond and high-yield bond categories represent a diverse cross section of funds, acccording to Morningstar data. But only two true high-yield ETFs returned enough to make our list. Other high performers were found among the “fallen angel” bond ETFs that target issuers who were recently downgraded to high-yield status.
Out of the 48 ETFs listed in Morningstar’s investment grade and high-yield corporate bond categories, many of those near the top of the list by three-year returns are among the lowest-cost passive funds available to investors.
Four of the top five ETFs by three-year performance are sponsored by BlackRock’s iShares ETF division.
These are Morningstar’s top 10 corporate bond ETFs by three-year return as of the market’s close on Dec. 1:
10. Franklin Liberty Investment Grade Corporate Bond ETF (FLCO), 6.89%
An investment-grade bond ETF, the $1.1 billion FLCO returned 6.89% over the past three years and 9.13% year to date. The ETF carries a 0.35% expense ratio.
9. Goldman Sachs Access Investment Grade Corporate Bond ETF (GIGB) ,7.19%
Goldman Sachs’ $750 million GIGB ETF returned 7.19% over the three-year period considered and 9.42% year to date. The fund carries a 0.14% expense ratio.
8. SPDR Portfolio Corporate Bond ETF (SPBO), 7.32%
State Street’s $307 million SPDR Portfolio Corporate Bond ETF carries a rock-bottom expense ratio of 0.06%. It has returned 9.61% year to date, and 7.32% over three years.
6. (tie) Fidelity Corporate Bond ETF (FCOR), 7.32%
Returning 7.32% over the past three years, Fidelity’s $247 million Corporate Bond ETF carries a 0.36% expense ratio. FCOR has returned 10.3% year to date.
6. (tie) VanEck Vectors Fallen Angel High-Yield Bond ETF (ANGL), 7.32%
Returning 10.44% year to date, the $3.7 billion VanEck Vectors Fallen Angel High Yield Bond ETF carries a 0.35% expense ratio. ANGL has returned 7.32% over the past three years.
4. (tie) iShares Intermediate-Term Corporate Bond ETF (IGIB) 7.39%
Returning 7.39% over the past three years, the $11.1 billion iShares Intermediate-Term Corporate Bond ETF carries a 0.06% expense ratio. Year to date, IGIB has returned 8.79%.
4. (tie) WisdomTree U.S.Corporate Bond ETF (WFIG,) 7.39%
Returning 9.35% year to date, the $55.9 million WisdomTree U.S. Corporate Bond ETF carries a 0.18% expense ratio. WFIG has returned 7.39% over the past three years.
3. iShares Fallen Angels USD Bond ETF (FALN), 7.49%
BlackRock’s $381 million iShares Fallen Angels USD Bond ETF returned 7.49% over the past three years. Carrying a 0.25% annual expense ratio, the fund has returned an impressive 11.98% year to date.
2. iShares Edge Investment Grade Enhanced Bond ETF (IGEB), 7.63%
Another iShares ETF, the $167 million Edge Investment-Grade Enhanced Bond ETF has returned 10.25% year to date. Carrying a 0.18% expense ratio, IGEB has returned 7.63% over the past three years.
1. iShares iBox $ Investment Grade Corporate Bond ETF (LQD), 7.95%
The highest-returning ETF over the past three years, the $58.2 biillion iShares iBox Investment Grade Corporate Bond ETF offered investors a 7.95% total return. LQD, which carries a 0.14% expense ratio, has also offered a 10.39% year-to-date return.
