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11 Dec 2006
Moody's Assigns Aaa/MR3 Ratings to the iShares $ TIPs Exchange-Traded Fund
First-Time Ratings Assigned to Newly Launched ETF
London, 11 December 2006 -- Moody's Investors Service today assigned a bond fund credit rating of
Aaa and a market risk rating of MR3 to the iShares $ TIPs Exchange-Traded
Fund (ETF). The Fund is scheduled for launch on 11 December 2006
and is part of BGI's latest ETF offering. The ratings are based
on the credit quality of the Fund's allowable investments,
the quality of the Fund's management relative to its investment
objectives, the manager's strong operations, including its
compliance function, and the Fund's expected sensitivity to
changing interest rates due its respective duration and average weighted
The Fund's investment manager is Barclays Global Investors Limited
("BGI"), a wholly owned subsidiary of Barclays PLC. The investment
objective of the fund is to provide investors with a total return,
taking into account both capital and income returns, which reflect
the return on US Treasury inflation-protected bonds. In
order to achieve this investment objective, the investment policy
of the Funds is to invest in a portfolio of US Treasury inflation-protected
bonds that so far as possible and practicable consist of the component
securities of the fund's benchmark, the Barclays US Government
Inflation-Linked Bond Index. The benchmark Index is designed
to provide representation of the outstanding issuance in the US treasury
inflation-linked protected bonds market.
The basis for the Fund's credit rating is predicated on its current
portfolio profile, as determined by its investment strategy and
benchmark content. The iShares $ TIPs ETF's index,
the Barclays US Government Inflation-Linked Bond Index, currently
has 20 constituents, all of which are backed by the full faith of
the US Government, thus carrying a Moody's credit rating of
Aaa. The benchmark index is rebalanced after the close of the last
business day of each month. The Fund will also be rebalanced accordingly,
with rebalancing initiated at T-3 and completed at 16:00
hours on the rebalancing day. Moody's will monitor rating changes
on an ongoing basis and portfolio changes resulting from rebalancing activities
on a monthly basis, and will amend the credit and market risk ratings
of the Fund as appropriate.
The assigned market risk rating represents Moody's opinion of the Fund's
expected future volatility in Net Asset Value ("NAV"). This is
based on historical benchmark results, typically longer-term,
as well as future expectations and market risk which may arise from the
Fund's investment strategy and the instruments used to facilitate
that strategy. As of August 31st 2006, Barclays US Government
Inflation-Linked All Bonds Index had an annual modified duration
of 8.6 years and a weighted average maturity of 10.7 years,
ranging between 8.1 and 7.1 and 10.2 and 11.4
years, respectively over the last two years. The Fund does
not currently make use of derivatives nor are there plans to engage in
derivative-based investing in the foreseeable future.
In addition, Moody's notes that BGI's internal portfolio management
procedures are particularly strong in index fund management, adding
further support to the ratings. BGI is an experienced fund sponsor
with well-developed trading, audit and compliance systems.
In particular, Moody's notes BGI's strong track record in managing
indexing strategies and as its status as one of the first investment managers
on the market to offer and manage exchange-traded funds.
The rating agency also notes the manager's successful track record in
managing indexing strategies with negligible tracking error.
BGI, through iShares, offers over 180 ETFs that trade globally.
These are registered in 10 countries and amount to approximately US$273
billion in assets under management (as of 24 November 2006). In
Europe, iShares has 45 ETFs registered in the UK, and approximately
140 listings in the Netherlands, Switzerland, Germany,
France and Italy. iShares is sponsored by BGI, one of the
world's largest investment managers with over US$1.9 trillion
of assets under management. The newly launched iShares $
TIPs ETF is part of the latest product offering.
Moody's money market and bond fund ratings express opinions on the investment
quality of shares in mutual funds and similar investment vehicles that
principally invest in short-term and long-term fixed-income
obligations, respectively. Moody's fund ratings have a dual
function: they address both credit quality and market risk considerations.
The credit ratings reflect the average credit quality of a portfolio and
are not intended to consider the prospective performance of a fund with
respect to appreciation, volatility of net asset value, or
yield. Funds rated Aaa are judged to be of an investment quality
similar to Aaa-rated fixed-income obligations --
that is, they are judged to be of the best quality. Moody's
market risk ratings use a six-tiered numerical scale, from
MR1+ to MR5. Funds rated MR3 are judged to have moderate sensitivity
to changing interest rates and other market conditions.
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Senior Vice President
Structured Finance Group
Moody's Investors Service
No Related Data.
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