Adapting to Changing Bond Markets

Unlike traditional core bonds, the Fund has the flexibility to actively manage interest rate risk and credit risk.

Duration

7

6

5

4

3

2

1

0

-1 

-2 

0.81

Correlation


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Weightings below zero result from the Fund using "short" positions to express negative views of a sector, so the Fund may generate a positive return if the value of the sector declines.

See how credit risk is related to yield.
Credit Risk
  • Refers to the potential that a borrower may not repay a loan in full
  • Investors are often compensated for this greater risk by receiving a higher yield

For important additional information, click here. For standard performance, click here. For standard performance of iShares Core Total U.S. Bond Market ETF (AGG), click here.
Past performance does not guarantee future results.

See how rising interest rates affect a bond's value.
Duration
(in years)
Move the slider bar to adjust the rise in interest rates.
Adjust the dial to change duration.
1.00% Increase in Interest Rate
Bond Values Fall
Interest Rate Risk
  • Also known as duration
  • A bond's sensitivity to a change in interest rates
  • For every 1% change in interest rates, a bond's price will move approximately 1% in the opposite direction for every year of duration

The two main risks related with bond investing are interest rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payments. Historically, traditional bond funds have been dominated by interest rate risk. Flexible bond strategies, like the Fund's, have the ability to actively manage the level of interest rate risk and assume more credit risk through exposure to securities such as high yield bonds, securitized assets and foreign debt.

All data as of 9/30/14 based on Institutional shares. Institutional shares may not be available to all retail investors. They are available to participants in wrap fee programs and other sponsored arrangements at various minimums, clients of registered investment advisors with $250,000 invested in the fund and direct investors with a minimum initial investment of $2 million. The Fund's investment strategy changed on 3/31/10, the date referred to as the strategy inception date.

All data in the performance tab is since March 2010, when the Fund's investment strategy changed. Traditional Core Bonds are represented by the Barclays U.S. Aggregate Bond Index. Traditional Core Bond Funds are represented by the Morningstar OE-Intermediate Term Bond category average. Nontraditional Bond Funds are represented by the Morningstar OE-Nontraditional Bond Fund category average.

Volatility refers to annualized standard deviation of daily returns for the trailing 30 days. Standard deviation is a measure of the dispersion of an investment's actual returns compared to its expected returns. Standard deviation is only one element of risk. Other risk factors should be considered.

Yield data refers to historical subsidized 30-Day SEC yields for Institutional shares as of the date indicated. Unsubsidized yields, which do not include the effects of fee waivers, would be lower.

Returns on the "Performance" tab are cumulative, from 3/31/10 to the date indicated under the sliding bar. The chart shows the growth of a $10,000 investment in the Fund's Institutional shares made on 3/31/10. Click the links beneath the charts for standardized returns for each fund.

Traditional Core Bonds in the "Implementation" tab are represented by the iShares Core Total U.S. Bond Market ETF (AGG), which seeks to track the investment results of the Barclays U.S. Aggregate Bond Index.

In tab one, click on the sectors to reveal definitions. Negative weightings may result from specific circumstances (including timing differences between trade and settle dates of securities purchased by the funds) and/or the use of certain financial instruments, including derivatives, which may be used to gain or reduce market exposure and/or risk management. Certain transactions the funds may utilize may give rise to a form of leverage through either additional market exposure or borrowing capital in an attempt to increase investment return. The use of such transactions includes certain leverage-related risks, including potential for higher volatility, greater decline of the fund's net asset value and fluctuations of dividends and distributions paid by the fund. % Notional Exposures represents a fund's use of derivatives, including but not limited to futures, options, and swaps. This value captures the fund exposures as if the derivative was replaced with the underlying asset and the corresponding financing or lending, such that all exposures sum to the net asset value. For non-derivatives, the Market Value and the Notional Market Value are identical. In tab two, click on legend items to reveal definitions of representative indexes. It is not possible to invest directly in an index.

Visit blackrock.com, iShares.com or contact your financial professional for a prospectus or summary prospectus, which includes investment objectives, risks, fees, charges, expenses and other information that you should read and consider carefully before investing. Investing involves risk, including possible loss of principal. Consult with your financial professional for additional information.

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Prepared by BlackRock Investments, LLC, member FINRA.

USR-3923