On June 17, 2025, we listed the Global X Investment Grade Corporate Bond ETF (GXIG) on the New York Stock Exchange ARCA. GXIG is an actively managed strategy designed to offer investors broad-based exposure to a basket of high-quality debt securities delivered through the convenience and liquidity of an ETF. It represents the sixth addition to Global X’s Fixed Income suite, and the first to offer exposure to the corporate bond universe within the United States.
In the pursuit of diversification across the fixed income sleeve of a portfolio, investment-grade corporate bond exposure may offer some potentially appealing characteristics. Perhaps just as important as analyzing yield potential and credit quality, however, is how an investor ultimately chooses to take interest in this space. While the indexing approach has proven effective for certain asset classes, particularly when operating within the ETF structure, we believe the depth of the corporate bond market within the United States could warrant a more selective approach.
In very large universes such as U.S. investment-grade bonds, passive full replication strategies may encounter certain structural considerations that active management approaches may be positioned to more dynamically navigate. The Global X Investment Grade Corporate Bond ETF seeks to provide this measure of flexibility, as well as a focused approach to portfolio development aimed at pursuing tactical positions to provide income and capital appreciation.
Key Takeaways
- At a time when corporate bond investments might be deemed appealing, the Global X Investment Grade Corporate Bond ETF (GXIG) may help investors overcome some of the barriers to entry that exist when seeking to purchase corporate debt securities on an individual basis.
- Relative to passive indexing instruments in the investment grade corporate bond universe, actively managing a portfolio of securities may prove pivotal to an investor’s bottom line.
- Global X’s portfolio management team applies a top-down analysis approach to the investment grade corporate bond market, assisted by a quantitative factor model and deep neural network to screen and evaluate potential opportunities.
GXIG Offers High-Quality U.S. Corporate Debt Exposure Through a Tactical Lens
For more than a decade following the 2008 financial crisis, U.S. bond investors navigated a prolonged period of historically low interest rates. Rates then began to recover in 2018 and 2019, before the COVID-19 pandemic prompted Federal Reserve officials to slash Treasury rates back again to near zero. The landscape has shifted dramatically since then. Corporate bond issuers are once again offering attractive yields not seen since before 2009, and the exchange-traded fund (ETF) space, providing liquid access to these securities, has proliferated materially from where it then sat.
When investors take aim at holding corporate bonds directly in their portfolios, minimum investment requirements and their limited availability in certain segments of the space might have represented material deterrents. Specifically, the par value of a corporate debt instrument typically sits at $1,000, compared to treasury securities that may be purchased in $100 lots. Additionally, smaller corporate bond issuances often suffer from limited trading volume, making acquisition more difficult and potentially creating unfavorable pricing conditions for individual investors.
However, the ETF revolution has transformed access to this market. From 2009 through 2024, the number of funds in Morningstar's U.S. Corporate Bond ETF category more than tripled, providing investors with liquid exposure to corporate debt markets that might have previously only been attainable through mutual funds and potentially less-efficient instruments.1
The Global X Investment Grade Corporate Bond ETF (GXIG) is one such ETF, and it looks to provide entree into this once less-accessible segment of the U.S. bond market by actively evaluating debt securities and creating a basket of holdings that its management team deems potentially undervalued. At an expense ratio of 0.14%, it represents the lowest cost active U.S. investment grade bond ETF in the market.2 The ETF aims not only to provide broad market exposure but also to deliver potential outperformance relative to the broader investment-grade bond universe while actively managing risk.
Characteristics Associated with Corporate Bond Indices May Favor an Active Strategy
While passive management can be effective for certain asset classes, the U.S. investment-grade corporate bond market presents specific challenges. The market for these debt instruments has tremendous depth, with indices like the Bloomberg U.S. Corporate Index carrying a constituency of roughly 8,300 securities alone.3 And, from a structural perspective, the very same index seeks to weigh its underlying bonds on the merit of par amount outstanding, where the issuer of the most total debt retains the highest share, while the issuer of the smallest amount of debt retains the lowest.
These structural characteristics create several operational challenges for passive strategies. First, debt-weighting methodologies may inadvertently force investors into larger positions in potentially lower credit quality issuers, essentially increasing exposure to companies simply because they have borrowed more. Additionally, index-replicating funds must include all index constituents regardless of attractiveness, potentially incorporating securities with unfavorable yields or soft risk-adjusted return potential. Perhaps most significantly, the rebalancing requirements inherent to index tracking can force managers into disadvantageous trading positions, limiting their ability to capitalize on pricing opportunities. This constraint may become particularly problematic given the uneven liquidity conditions that characterize different segments of the corporate bond market.
Active managers, on the other hand, can operate with considerably more flexibility. Free from mandatory rebalancing schedules, they can capitalize on price discovery opportunities, seeking a fair value for their assets rather than accepting the prices that are presented to them. This flexibility extends to security selection, allowing managers to independently assess factors such as creditworthiness rather than accepting index-mandated allocations. Active managers can also incorporate a broader range of factors into their decision-making process, including corporate actions, interest rate expectations, and geopolitical developments that may not be reflected in index weightings but could significantly impact individual securities.
GXIG Utilizes a Multi-Pronged Bond Evaluation Process to Pursue Value
Given the expansive nature of the investment-grade corporate bond universe, portfolio managers of the Global X Investment Grade Corporate Bond ETF employ a pair of models to assist them in the security screening process. The first is a quantitative (quant) factor model, and the second is supported by a deep neural network (AI model). Both models, at large, are designed to assist only in the screening process, with the fund’s active management team maintaining final say over those issues that are ultimately included in the portfolio. It all starts, however, with the Bloomberg U.S. Corporate Index, which is widely recognized as a benchmark for investment-grade corporate bonds.
To observe the relative value of bonds within this index against one another, analysis commences with a segmentation of the universe into peer groups denoted by credit rating, tenor, and sector. This can help control for factors like default risk, interest rate sensitivity, and sector-specific cycles that would otherwise distort relative value comparisons.
Within each peer group, the strategy applies factor analysis using market and fundamental metrics – such as yield potential and earnings growth – tailored to the current credit cycle phase. The analytical framework adapts dynamically: different factors have proved most predictive during expansion, recovery, downturn, and repair phases of the credit cycle, seeking to keep the model nimble across bull and bear markets.
Following this relative value analysis, GXIG's management team selects the most attractively valued bonds from each peer group. The team maintains discretion to adjust these selections based on evolving market conditions, including credit events, yield curve shifts, or changes in investor sentiment that may favor certain securities over others.
Conclusion: GXIG Offers an Active Optimization Approach to Investing in the Corporate Bond Universe
Amid persistent interest rate uncertainty, investment grade corporate bonds may offer investors an attractive balance between credit risk and yield. However, the method of exposure has the potential to have material ramifications. The Global X Investment Grade Corporate Bond ETF (GXIG) seeks to provide investors with income and capital appreciation by investing in high-quality debt securities while addressing the potential structural inefficiencies of passive index strategies, particularly forced rebalancing and debt-weighted allocations that can impair performance. Through active security selection and dynamic factor analysis, the fund targets providing return while maintaining disciplined risk management.
Related ETFs
GXIG – Global X Investment Grade Corporate Bond ETF
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