Handpicked Selection of Best Bond ETFs

Handpicked Selection of Best Bond ETFs

Raph Antoine
Raph Antoine
Updated:

The Definitive Guide to Bond Index Investing - Best ETFs

This is the ETF selection part of our definitive guide to Bond Index Investing.

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Let’s dive into the Best Bond ETFs.

KEY TAKEAWAYS

  • We selected the Best UCITS ETFs from reputable Asset Managers, large enough to reduce closure risk, with established track record, liquid, cheap and widely available. 
  • The Best Global Bond Government ETF is xxx.
  • The Best Global Aggregate Bond ETF is xxxx
  • The Best European Government Bond ETF is xxx
  • The Best European Aggregate Bond ETFs is xxx.
  • The Best UK Government Bond ETFs is xxxx.
  • The Best Short-Term Government Bond ETF is xxxx
  • The Best Short-Term Investment Grade Bond ETFs is xxxx
Here is the full analysis

How we rank ETFs

Our Selection Criteria

Our 5 Key Criteria take a Long-Term Investor’s Perspective:
 
  • Reputable – Only Established Asset Managers with a preference for Tier 1 players like BlackRock (iShares), Vanguard and State Street (SPDR). Strong performance from local players, including DWS (Xtrackers), Amundi (and Lyxor) or HSBC, justifies consideration.
  • Large – A minimum Fund size $200m (unless justified) to reduce the commercial risk of ETF closure. We combine distributing and accumulating share classes.
  • Established – Unless justified, a 3-year ETF Performance track record is required.
  • Cheap – Tracking Difference is a comprehensive backwards-looking measure. A positive 3-Year Tracking Difference below, from Institutional Data sources, including Bloomberg, reflects outperformance against Net Tax Index. In practice, this outperformance is lower as the most punitive tax treatment is applied to benchmarks, but it helps in the relative ranking of ETFs. TER is a forward-looking measure, but less comprehensive.
  • Available and Liquid – All ETFs should be available from some of the most used brokers like Interactive Brokers or DEGIRO. We also monitor industry flows to give preference to funds with high daily volumes.
These five criteria are supplemented by other asset-class-specific criteria, as explained in related sections. We also refer to comprehensive guides for each asset class.

Our Prioritisation

The below tables list the Top 3-5 Funds. Our prioritisation is based on Portfolio Management experience and is a balancing act between the above overarching and asset-specific criteria. For example, we may override marginal Tracking Difference outperformance with reputation or liquidity considerations.

For instance, we prefer the iShares MSCI World UCITS ETF to the marginally better-performing competitors due to brand, higher liquidity, and the fund being the reference name in its asset class.

GLOBAL ETFs

Asset Class Criteria

  • Aligned with Market Practice – Unhedged Currency. 
  • Tax efficient – Irish Domiciled ETFs reduce US Companies’ Dividend Tax from 30% to 15%.
  • Simple – For Global exposure, Investors choose physical replication. 

Global ETF SELECTION

RankGlobal(EMs&DMs) ETF3YTERAcc.Dist.SizeInceptionIndexBenchmarkAcc ISINDist ISIN
1Vanguard FTSE ALL-World UCITS ETF16.4%0.22%
✓
✓
2605/2012Large, Mid & Some Small CapsFTSE All World Net Total Return IndexIE00BK5BQT80IE00B3RBWM25
1iShares MSCI ACWI UCITS ETF16.9%¹0.20%¹
✓
✘
1310/2011Large & Mid CapsMSCI All Country World Net Total Return IndexIE00B6R52259
✘
2SPDR MSCI ACWI IMI ETF UCITS ETF16.2%²0.17%²
✓
✘
1.605/2011Large, Mid And Small CapsMSCI ACWI IMI Net Total Return IndexIE00B3YLTY66
✘
3SPDR MSCI ACWI UCITS ETF15.6%³0.12%³
✓
✘
2.705/2011Large & Mid CapsMSCI All Country World Net Total Return IndexIE00B44Z5B48
✘
🆕Amundi Prime All Country World UCITSN/A0.07%
✓
✓
102/2024Large & Mid CapsSolactive GBS Global Markets Large & Mid CapIE0003XJA0J9IE0009HF1MK9
¹TER changed from 0.6% to 0.2% in Q1'2021 ²TER changed from 0.4% to 0.17% in Q1'2023 ³ TER changed from 0.4% to 0.12% in Q3'2024. Sources: Bloomberg, Trackinsight, Bankeronwheels.com. Data as of August 2024. Acc/Dist Cumulative size in € billion. 3Y Return is annualised 3-year performance as of August 2024. TER - Total Expense Ratio. Acc. - Accumulating Share Class. Dist. - Distributing Share Class. All share classes are USD. All ETFs use Physical Replication and are domiciled in Ireland.

Best Global ETF

Vanguard FTSE All-World UCITS ETF

Vanguard FTSE All-World UCITS ETF has a marginal diversification edge, provides the option of a distributing share class, and is the largest fund in its category. Additionally, it has the highest Tracking Difference and the second-lowest TER.

Best Alternative

iShares MSCI ACWI UCITS ETF

The iShares MSCI ACWI UCITS ETF is leading in TER. BlackRock also has the strongest Brand Name among Institutional Investors and the biggest Asset Manager in the World in terms of Assets Under management.  Up until 2021, this ETF was the most expensive in terms of TER and didn’t rank that well in terms of Tracking Difference. As of February 2021, the TER decreased from 0.6% to 0.2%. This change is expected to bring Tracking Difference on par with Vanguard. 

State Street provides the option of investing in World’s small caps through the SPDR MSCI ACWI IMI UCITS ETF.  In Q1 2023, the TER has been lowered from 0.4% to 0.17%. But, you will rely on a correct sampling. SPDR also has an MSCI ACWI ETF, not tracking small caps, but it is much smaller than rivals and has a worse TD. 

Read Our Guide to Global ETFs
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Next Steps

Not sure which Index to choose? This ETF selection results from our deep dives into different asset classes.  Start by having a look at the sections of our definitive guide to Equity Index Investing.

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