iShares Overseas Government Bond Index: August 2026 fund update

• BlackRock, a pioneer in index investing, has a great record of managing index funds

• This fund provides access to a range of overseas government bonds

• It’s a simple, low-cost way to track the J.P. Morgan Global Government Bond Index ex UK

• This fund doesn’t feature on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The iShares Overseas Government Bond Index fund invests in bonds issued by governments of developed countries, excluding the UK. These bonds are typically viewed as lower risk, because it’s unlikely a developed country’s government would default on its bonds, though it’s not guaranteed. Because of this, the income paid by government bonds tends to be lower than corporate bonds.

An index tracker fund is one of the simplest ways to invest, and this fund could be a low-cost starting point for an investment portfolio aiming to provide a combination of income and growth. It could be a good addition to a more conservative portfolio or could diversify one that is focused on shares or corporate bonds.

While we view the fund as a useful way to gain passive exposure to overseas government bonds, it’s not on the Wealth Shortlist as it already features funds that offer exposure to this part of the market and are run by managers we rate highly.

Manager

The team that manages this fund is led by Divya Manek. While Manek leads the team, each index fund at BlackRock has a primary and secondary manager, though in practice the broader team helps to manage each fund.

Francis Rayner is the Head of Rates at BlackRock and the primary manager of this fund. Rayner joined Barclays Global Investors in 2008 which merged with BlackRock in 2009. The secondary manager is Samia Zhaibet. She joined BlackRock’s graduate scheme in 2018 and worked her way up to become a fund manager.

BlackRock also has other teams that trade shares and bonds based across the world. The teams function in different time zones, which means they have access to timely information, and can provide input on market trends and corporate actions. Their global approach helps drive efficient management of their funds, while providing simple and effective tracking options for investors.

Process

This fund aims to track the performance of the J.P. Morgan Global Government Bond Index ex UK. It invests in almost every bond in the index. This is known as partial replication, which could help the fund track the index closely without incurring the cost of holding every bond.

The fund is currently made up of 1,001 government bonds with varying maturities. It invests in bonds issued by governments in developed countries, excluding the UK. Just over half of the fund is invested in the US (55.08%), followed by Japan and France at 14.89% and 7.04% respectively. The fund may invest more than 35% in bonds issued by a single government, which can increase concentration risk.

The team uses currency hedging which means overseas currency bonds are converted back to sterling. The prices and income of global bonds can go up and down with foreign currency movements, adding volatility for UK investors. By hedging, investors could experience less extreme price movements over time, which could help smooth potential returns. Although, currency hedging can be expensive and is done through derivatives which adds risk.

The fund can lend some of its investments to others in exchange for a fee in a process known as stock lending. This offsets some of the costs involved with running the fund. Since BlackRock’s lending program started in 1981, only three borrowers with active loans have defaulted. In each case, BlackRock was able to repurchase every security out on loan with collateral on hand and without any losses to their clients. Even so, stock lending adds risk.

Culture

BlackRock is currently the largest asset manager in the world, running around $15trn of assets globally. The company was founded by eight partners including current CEO Larry Fink and is known for both active and index strategies. Employees at BlackRock are encouraged to hold shares in the company so that they are engaged with helping the company perform well and grow. The iShares brand represents BlackRock’s family of index tracking and exchange-traded funds.

As the world’s largest asset manager, and with lots of resource and knowledge under its belt, BlackRock benefits from unique access to the marketplace, which can help reduce trading costs. BlackRock is also a pioneer in the passive investment space and has a track record of innovation in this part of the investment market.

The team running this fund also works closely with various fixed income and risk departments across the business. We believe this adds good support and challenge on how to run the fund effectively.

ESG Integration

BlackRock was an early signatory to the Principles for Responsible Investment (PRI) and has offered Environmental, Social and Governance (ESG)-focused funds for several years, including through its iShares range of index products. However, it only made a company-wide commitment to ESG in January 2020. Following that announcement, the company promised to expand its range of ESG-focused ETFs, screen some thermal coal companies out from its actively managed funds and require all fund managers to consider ESG risks.

BlackRock’s Investment Stewardship Team aims to vote at 100% of meetings where it has the authority to do so. The Investment Stewardship team engages with companies, in conjunction with fund managers, and the results of proxy votes can be found on the BlackRock website’s ‘proxy voting search’ function, complete with rationales for votes against management. The firm also outlines its work on voting and engagement in an annual ‘Voting Spotlight’ report, and quarterly ‘Engagement Summary’ reports.

BlackRock has faced sustained criticism in recent years for the limited support it has given to shareholder resolutions focused on climate and other environmental and social issues. While the firm has increased transparency around its voting activity and now routinely provides rationales for key votes, its support for environmental and social shareholder proposals has declined sharply, from around 40% in 2021 to less than 2% in 2025. BlackRock argues that many such proposals are overly prescriptive, lack economic merit or do not promote long-term shareholder value, although this position was met with scepticism by some stakeholders.

In 2024, BlackRock’s US arm stepped back from the Climate Action 100+ collective engagement initiative, citing legal considerations, although its international arm remained a member.

iShares Overseas Government Bond Index tracks a benchmark that doesn’t specifically integrate ESG analysis or exclude bonds issued by companies in certain industries like tobacco or weapons.

Cost

The fund has an ongoing annual fund charge of 0.13%. Our platform charge of up to 0.35% per annum also applies, except in the HL Junior ISA, where no platform fee applies. Both a buy and sell instruction will be subject to HL dealing charges. Find out more about our charges

Performance

The iShares Overseas Government Bond Index fund has tracked its benchmark closely since it launched in January 2011. As expected of index funds, it’s fallen behind the benchmark over the long term because of the costs involved in running the fund. However, the management tools used by the team have helped to keep performance close to the index. Remember, past performance isn’t a guide to the future.

This sterling hedged shareclass launched in August 2023 and has returned 8.37%* during that time. Over the past year, the fund has delivered modest positive returns, although performance has been volatile at times as investors continued to assess the path for inflation and interest rates.

Bond yields move in the opposite direction to prices. Usually, when interest rates are cut, bond yields fall, and prices rise.

Many major developed markets, like the US and Europe, cut interest rates in 2025 as inflation continued to ease from its post-pandemic highs. However, ongoing conflict in the Middle East has pushed energy prices higher, raising concerns that inflation could increase again, which means that rates may not be cut as much as expected or could even rise. As a result, government bond yields have been volatile as markets reassess the outlook for interest rates.

Japan has been in a different position. After decades of very low inflation and interest rates, stronger wage growth and more persistent inflation have allowed the Bank of Japan (BOJ) to increase interest rates. Over the past year, the BOJ raised rates twice, taking them to their highest level since 1995. This marks a significant shift compared with most other major developed markets.

The fund’s yield was 3.73% as of the end of June 2026. Yields aren’t guaranteed and shouldn’t be considered a reliable indicator of future income.

Given BlackRock’s size, experience and expertise running index tracker funds, we expect the fund to continue to track the index well in future, though there are no guarantees.

N/A** = performance data for this period is not available due to when the shareclass was launched.