Earlier in May, VettaFi hosted an Income Investment Strategy Symposium. Many of the experts we talked to highlighted ETFs and we partially marketed the event on this website with “ETF” in the name. However, we knew that the ETF investment vehicle was not the only means of getting exposure.
Indeed, we surveyed the attendees and I found the data insightful. ETFs were the most popular way to invest in fixed income. Two-thirds (67%) of the audience indicated they used ETFs. However, 60% were utilizing mutual funds. Meanwhile, less than half (44%) were tapping the bond market directly and not just through a fund.
Fixed income mutual funds managed $5.2 trillion in assets at the end of March 2025, according to Investment Company Institute data. This was more than double the $1.9 trillion in fixed income ETFs. However, the 23% growth in assets, year-over-year, for these ETFs was more than triple that of their mutual fund cousins.
There are a few reasons why fixed income ETFs are gaining traction. These include costs, exposure precision, and the growing supply of actively managed ETFs. Let’s look at these briefly.
Low Fee Products Help Advisors Build Portfolios
There are more than 30 fixed income ETFs with a net expense ratio of 0.03% or lower. Dozens more have expense ratios below 0.10%. The BNY Mellon Core Bond ETF (BKAG ) is the cheapest fixed income ETF. BKAG has a fee of zero . This is not a typo. It really is zero. This fund provides the investment grade bond exposure to the Bloomberg Aggregate Bond index. It’s actually hard to believe BKAG has just under $2 billion in assets.
Peers like the Vanguard Total Bond Market ETF (BND ) and the iShares Core U.S. Aggregate Bond ETF (AGG ) manage $126 billion and $123 billion, respectively. AGG and BND have fees of 0.03% that are still much cheaper than what many mutual funds charge. These funds make building a portfolio with fixed income ETFs easy.
Target Bond Exposure Directly
AGG, BKAG, and BND can serve as great building blocks for a fixed income portfolio. They take on some interest rate risk and incur some credit risk. However, advisors that want to support a more risk-averse or risk-tolerant investor can use ETFs to meet objectives.
For example, the Schwab Short-Term U.S. Treasury ETF (SCHO ) could help with capital preservation objectives. Meanwhile, the SPDR Portfolio High Yield Bond ETF SHPY provides more reward potential by investing in speculative grade bonds. For those wanting to diversify geopolitically, there are a range of ETF options. The Global X Emerging Markets Bond ETF (EMBD ) is one of them.
Active Fixed Income: Not Just Available as a Mutual Fund
Fixed income mutual funds have done a stronger job of holding onto shareholders than equity mutual funds over the years. I believe this partially due to the belief that the bond market is a challenge to navigate on one’s own. For many, paying for active management is warranted. Indeed, active bond managers historically have done better relative to a respected benchmark than their equity counterparts according to the SPIVA Scorecard.
Recently, asset managers have seen the opportunity to leverage their fixed income expertise to meet ETF-minded advisors and investors. According to JPMorgan, there were 120 active fixed income ETF launches in the one-year period ended April. This compares to just 30 passive product launches.
For example, the BondBloxx IR+M Tax-Aware Intermediate Duration ETF (TXXI) and the Macquarie National High-Yield Municipal Bond ETF (HTAX) launched in March. DoubleLine, Nuveen, and Thornburg are others that launched active fixed income ETFs in 2025. These funds joined products from Fidelity and PIMCO that have ten-year records.
Active fixed income ETFs are indeed in demand. At the end of April 2025, active ETFs managed $331 billion in assets, equal to 17% share of the market. Assets have grown at a 37% compounded annualized growth rate over the past 10 years per JPMorgan.
It is no surprise that ETFs are increasingly becoming the vehicle of choice for fixed income exposure.
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