Strong inflows sparks iShares move to switch bond fund indices

iShares, the exchange traded fund (ETF) arm of BlackRock, is changing the indices underlying a range of its corporate bond funds.

The switch, which is subject to shareholder approval, will see the £1.3 billion iShares Markit iBoxx £ Corporate Bond, Markit iBoxx $ Corporate Bond and Markit iBoxx Euro Corporate Bond change to broader, more diversified benchmarks.

iShares said this is due to the ‘significant size’ of the funds relative to the underlying indices, which will likely make adequate tracking hard to achieve.

The issuer said: ‘This is because the current benchmark indices have a small number of constituents, which become increasingly difficult to replicate as the Sub-funds benchmarked to them have grown in size.’

iShares added: ‘Importantly, although broader, the new benchmark indices will continue to have a focus on the most liquid and investable parts of the corporate bond market, in order to ensure consistency with the current characteristics and investment objective of each Sub-fund.’

The changes will include a switch from the Markit iBoxx Sterling Liquid Corporates Long-Dated Bond index to the Markit iBoxx GBP Liquid Corporates Large Cap index and the Markit iBoxx USD Liquid Investment Grade Top 30 index to the Markit iBoxx USD Liquid Investment Grade Index.

It will also see the Markit iBoxx Euro Liquid Corporate index change to the Markit iBoxx Eur Liquid Corporates Large Cap index.

The changes will take place at the start of March, subject to shareholder approval.