Fixed Income ETFs: What Every Financial Advisor Needs To Know

Over the past several years, the ETF industry has expanded by leaps and bounds, with new issuers and new funds appearing with great frequency. Equity ETFs have multiplied, offering exposure to stock markets that were previously inaccessible (or at least difficult to access efficiently) for most investors. The following fund launches in recent months highlight the ever expanding scope of equity ETFs:

• June 2009: iShares MSCI All Peru Capped Index Fund (EPU)
• July 2009: Javelin Exchange Traded Shares (JETS) Dow Jones Islamic Market International Index Fund (JVS)
• August 2009: Van Eck Market Vectors Vietnam ETF (VNM)

But fixed income ETFs have trailed behind their equity counterparts. According to data provided by the National Stock Exchange, fixed income ETF assets totaled about $81.8 billion in July, compared to more than $465 billion in U.S. and international equity funds. And according to our ETF screener, there are only about 70 U.S.-listed bond ETFs, compared to more than 600 equity funds.When iShares introduced bond ETFs several years ago, the products were greeted with a great deal of skepticism. Many investors couldn’t grasp how the concept of bonds inside an exchange-traded structure could work out, and cautiously kept their distance.