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Barclays Dominates List of Best-Rated ETFs

Stocks in this article: BCS BK SST

TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Barclays (BCS) dominates the list of the 25 best-rated exchange-traded funds on the strength of its fixed-income funds during the longest recession in more than half a century.

Twenty-one of the 25 most highly rated ETFs are owned by Barclays or track a Barclays index. Ratings

Barclays agreed to sell its iShares ETFs to CVC Capital Partners for $4.4 billion. The pending sale is bullish for Barclays in that the deal locks in a fair price while allowing the company to continue to shop iShares to other potential suitors until the acquisition closes. Also, if CVC successfully resells iShares, Barclays gets 20% of the increase in cash.

Barclays retains the revenue generated from the securities servicing for iShares, although State Street (STT) and Bank of New York Mellon (BK) have been cited as potential bidders on this business.

The three best-rated exchange-traded funds based on March 31 data are Market Vectors-Barclays AMT-Free Short Municipal ETF (SMB), SPDR Barclays Capital Short Term Municipal Bond ETF (SHM) and the iShares Barclays 10-20 Year Treasury Bond Fund (TLH). In this time of financial uncertainty, the "buy"-rated fixed income ETFs listed below can be used to balance the overall risk in an investor's portfolio.

The only two non-fixed-income ETFs with top grades on the list are bullish currency plays. The PowerShares DB US Dollar Index Bullish Fund (UUP) is a bet on the U.S. dollar against the euro, Japanese yen, British pound, Canadian dollar, Swedish krona and Swiss franc. The Market Vectors-Renminbi/USD ETN (CNY) uses short-term forward contracts to benefit from a rise in China's currency in relation to the U.S. dollar.

Best-Rated Exchange Traded Funds
Fund (Ticker)
Overall Grade
Reward Grade Risk Grade Objective
Market Vectors Short Muni (SMB) A+ A+ B Municipal - National
SPDR Barclays Cap Short Term Muni B (SHM) A+ A+ B+ Municipal - National
iShares Barclays 10-20 Yr Treasury (TLH) A+ A+ B Government Bond
iShares Barclays 3-7 Year Treasury (IEI) A+ A B+ Government Bond
PowerShares DB US Dollar Bullish Fd (UUP) A+ A+ B Currency
SPDR Barclays Cap Interm Term Trs E (ITE) A+ A B Government Bond
iShares Barclays 1-3Yr Treasury Bd (SHY) A+ A B Government Bond
iShares Barclays 7-10Yr Treasury Bd (IEF) A+ A+ B Government Bond
PowerShares VRDO Tax-Free Weekly (PVI) A+ A- B+ Municipal - High Yield
iShares Barclays MBS Bond Fd (MBB) A+ A B General Mortgage
Market Vectors Interm Muni (ITM) A+ A+ B Municipal - National
iShares Barclays Aggregate Bd (AGG) A+ A B General Bd - Investment Grade
iShares Barclays Intrm Govt/Crdt Bd (GVI) A+ A- B General Bd - Investment Grade
iShares Barclays Govt/Credit Bd (GBF) A+ A- B Government Bond
iShares S&P National Municipal Bond (MUB) A+ A B Municipal - National
SPDR Barclays Cap Muni Bond ETF (TFI) A+ A+ B Municipal - National
iShares Barclays Short Treasury Bd (SHV) A+ B+ B+ Government Bond
SPDR Barclays Cap Aggregate Bnd ETF (LAG) A+ A- B General Bd - Investment Grade
iShares S&P CA Municipal Bond (CMF) A+ A+ B Municipal Single State
Market Vectors Chinese Renminbi USD (CNY) A+ A B Currency
Claymore US Cp Mkt Micro Trm Fx Inc (ULQ) A+ B+ B General Bd - Investment Grade
Vanguard Short Term Bond ETF (BSV) A+ A- B General Bd - Investment Grade
SPDR Barclays Cap 1-3 Month T-Bill (BIL) A+ B+ B Government Bond
SPDR Barclays Cap CA Muni Bond ETF (CXA) A+ A B Municipal - National
iShares Barclays TIPS Bond (TIP) A+ A B Government Bond
Source: Ratings

The grades can be interpreted as follows: A is "excellent" or "buy." B is "good" or "buy." C is "fair" or "hold." D is "weak" or "sell." And E is "very weak" or "sell." A plus or minus sign designates that a fund is in the top or bottom third of funds with the same letter grade.

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