Exchange-traded funds can offer a simple and inexpensive way to gain exposure to eurozone corporate debt, and some of these are highly rated by Morningstar’s fund analysts. This comes at a time when in the eurozone the headline inflation rate reached the European Central Bank’s target level, falling from 2.2% in April to 1.9% in May, and real interest rates are close to neutral.
In an environment of uncertainty, the search for solutions to generate returns while mitigating risk is paramount for investors, and fixed income can play a part here. In this investment universe, European credit could be an attractive option as many companies have entered this period of instability with strong balance sheets and overall positive fundamentals.
“The strong euro and recent low energy prices help solidify this outlook,” says Jenna Barnard, co-head global bonds at Janus Henderson.
“Unlike the United Kingdom, which has had problems reducing residual inflation and high wages, and the United States, where the inflationary impact of tariffs is being discussed, the ECB now enjoys a favorable inflationary environment and the eurozone is the only major developed economy expected to achieve a core inflation rate of 2% or less by next year,” she adds.
According to Eurizon Capital’s latest investment report, “corporate bond spreads are still volatile but continue to represent an interesting source of additional return over government bonds.”
Screening For the Best Euro Corporate Bond ETFs
To help investors find ETFs focused on corporate bonds issued in euros, we’ve screened 49 ETFs in Morningstar’s EUR Corporate Bond category for those with either Gold, Silver, or Bronze Medalist Ratings.
A Gold Medalist Rating means Morningstar’s analysts believe a fund has the greatest chance of outperforming its category over the long term, while a Silver or a Bronze rating means they believe it will outperform its relevant performance benchmark and/or peer group.
A number of different providers make the list:
- iShares Core € Corp Bond UCITS ETF EUR IEAC
- Vanguard EUR Corporate Bond UCITS ETF VECP
- iShares € Corp Bond ESG SRI UCITS ETF EUR SUOE
- Xtrackers II EUR Corporate Bond UCITS ETF XEC1
- Amundi Eur Corporate Bond UCITS ETF DR ETFCRP
- Amundi EUR Corporate Bond Climate Paris Aligned UCITS ETF CRPX
- SPDR Bloomberg Euro Corporate Bond UCITS ETF SYBC
We screened for ETFs with Gold, Silver, or Bronze Medalist Ratings that are 100% assigned by Morningstar analysts (rather than indirectly or quantitatively assigned). All seven ETFs that made it through the screen hold a Medalist Rating of Bronze and are passively managed.
Here’s a closer look at the strategies:
iShares Core € Corp Bond UCITS ETF EUR IEAC
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
The £12.1 billion iShares Core € Corp Bond UCITS ETF rose 4.82% over the past year. The gain on the passively managed fund beat the 4.48% gain on the average fund in the EUR corporate bond category, leaving it in the 35.0th percentile for performance. The fund performed roughly in line with its benchmark, the Morningstar Eurozone Corporate Bond Index. Year to date, the iShares fund rose 3.45%, while the average fund in its category rose 3.32%.
Vanguard EUR Corporate Bond UCITS ETF VECP
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
The £4.4 billion Vanguard EUR Corporate Bond UCITS ETF rose 4.51% over the past year. The fund performed roughly in line with its benchmark, the Morningstar Eurozone Corporate Bond Index. Year to date, the Vanguard fund rose 3.47%.
iShares € Corp Bond ESG SRI UCITS ETF EUR SUOE
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
The passively managed iShares € Corp Bond ESG SRI UCITS ETF gained 4.77% over the past year, outperforming the average fund in the EUR corporate bond category, which rose 4.48%. The fund placed in the 38.0th percentile for performance and performed roughly in line with its benchmark, the Morningstar Eurozone Corporate Bond Index. The £4.3 billion fund has gained 3.43% year to date, while the average fund in its category is up 3.32%.
Xtrackers II EUR Corporate Bond UCITS ETF XEC1
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
The £3.4 billion Xtrackers II EUR Corporate Bond UCITS ETF rose 4.77% over the past year. The gain on the passively managed fund beat the 4.48% gain on the average fund in the EUR corporate bond category, leaving it in the 38.0th percentile for performance. The fund performed roughly in line with its benchmark, the Morningstar Eurozone Corporate Bond Index. Year to date, the Xtrackers fund rose 3.42%, while the average fund in its category rose 3.32%.
Amundi Eur Corporate Bond UCITS ETF DR ETFCRP
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
The £1.6 billion Amundi Index Solutions - Amundi Eur Corporate Bond rose 4.78% over the past year. The fund performed roughly in line with its benchmark, the Morningstar Eurozone Corporate Bond Index. Year to date, the Amundi fund rose 3.44%.
Amundi EUR Corporate Bond Climate Paris Aligned UCITS ETF CRPX
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
The £849.7 million Amundi EUR Corporate Bond Climate Paris Aligned UCITS ETF rose 4.6% over the past year. The fund performed roughly in line with its benchmark, the Morningstar Eurozone Corporate Bond Index. Year to date, the Amundi fund rose 3.26%.
SPDR Bloomberg Euro Corporate Bond UCITS ETF SYBC
- Morningstar Medalist Rating: Bronze
- Morningstar Rating: ★★★
Over the past year, the passively managed SPDR Bloomberg Euro Corporate Bond UCITS ETF rose 4.78%, while the average EUR corporate bond fund gained 4.48%. The fund placed in the 37.0th percentile for performance and performed roughly in line with its benchmark, the Morningstar Eurozone Corporate Bond Index. The £675 million fund has climbed 3.49% year to date, outperforming the average fund in its category, which rose 3.32%.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
