Under The Hood: Bonds, International Corporate Bonds

When it comes to corporate bond ETFs, for better or worse, the discussion seems to begin and end with the iShares iBoxx $ Investment Grade Corporate Bond Fund LQD. That's not surprising as LDQ is simply the juggernaut of this ETF genre. Almost nine years old, LQD has amassed nearly $14 billion in assets under management. That's quite studly, but there are other options in the corporate bond arena to consider, particularly for the investor looking for some international exposure. For those craving some global, high-grade corporate bond fare today's “Under the Hood” candidate, the PowerShares International Corporate Bond Portfolio PICB is worth a look. As it turns out, PICB celebrated its first birthday last week and in its 53 weeks of trading, the ETF has done pretty well for itself, hauling in nearly $55 million in AUM. With an expense ratio of 0.5% and 168 holdings, PICB focuses on high-grade corporate debt issues denominated in Australian dollars, British pounds, euros, Canadian dollars, Japanese yen and Swedish krona, among other non-dollar currencies. Along those lines, it should come as no surprise that PICB focuses almost exclusively on developed markets. British corporate bonds account for over 17% of the ETF's weight while France chimes in at over 8%. Italy and Germany both get weights above 7%. Despite the international bias, PICB is home to bonds from issuers most American investors have at least heard of such as Barclays BCS, Bank of Nova Scotia BNS, France Telecom FTE and Telefonica TEF. With a distribution yield of 3.66%, PICB certainly represents a better option than a money market or a CD, not to mention the ETF is optionable, presenting investors with another avenue for generating income. PICB's yield to maturity and yield to worst are both 4.28%. Alright, so we've packed a lot of statistics into this edition of “Under the Hood,” but the most important statistic of all highlights why investors may want to consider PICB before LQD. The PowerShares offering is up 6.4% year-to-date, nearly triple the returns offered by the bigger, more popular LQD.