A letter sent to shareholders on 2 January 2013 proposed changing the benchmark indices of the iShares Markit iBoxx £ Corporate Bond, iShares Markit iBoxx $ Corporate Bond and iShares Markit iBoxx Euro Corporate Bond ETFs.
The company said the move to broader, more diversified benchmark indices is a result of the “significant size” of each ETF.
“Adequate tracking by the Sub-funds will soon cease to be viable without moving to broader benchmark indices,” the letter explained.
“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.”
However, iShares stressed that the new indices will continue the ETFs’ focus on the most liquid and investable parts of the corporate bond market, maintaining consistency with the current characteristics and investment objective of each product.
The £1.3bn iShares Markit iBoxx £ Corporate Bond ETF will see its benchmark change from the Markit iBoxx Sterling Liquid Corporates Long-Dated Bond Index, which has 40 constituents, to the Markit iBoxx GBP Liquid Corporates Large Cap Index, which has 320 constituents.
The $1.6bn iShares Markit iBoxx $ Corporate Bond ETF will track the 1,013 constituents of the Markit iBoxx USD Liquid Investment Grade Index instead of the 30 in the Markit iBoxx USD Liquid Investment Grade Top 30 Index.
Finally, the €3.4bn iShares Markit iBoxx Euro Corporate Bond ETF will be benchmarked against the 810-strong Markit iBoxx EUR Liquid Corporates Large Cap Index instead of its current Markit iBoxx Euro Liquid Corporate Index, which has 40 constituents.
The proposed moves, which are still subject to shareholder approval, are expected to take place on 1 March 2013.