Fixed income ETFs continue to gain traction globally. As of August 2024, the asset category managed $2.5 trillion in assets, with iShares managing $1 trillion alone.
Two decades ago, the first fixed income was launched in Canada, the iShares Core Canadian Universe Bond Index ETF. However, the ability to trade bonds on a stock exchange in a diversified low cost manner has taken off in the U.S. and other global markets.
“There is no question that bond ETFs have revolutionized the way people invest in fixed income,” explained Steve Laipply, Global Co-Head of Fixed Income ETFs at BlackRock. “From individuals seeking to lock in diversified yields to large, institutional investors using the liquidity and precision of bond ETFs to manage risk at scale.
Global Fixed Income ETF Leader
iShares gathered over $90 billion of net inflows in the first eight months of 2024 across the globe to lead the industry. In the U.S., we have seen demand for the firm’s strategic low-cost broad market ETFs as well as its more tactical index-based products.
For example, the iShares Core US Aggregate Bond ETF (AGG ) and the iShares Core Total USD Bond Market ETF (IUSB ) added $14 billion and $5.9 billion, respectively, year-to-date through August according to VettaFi. Meanwhile, the iShares 20+ Year Treasury ETF (TLT ) and the iShares Broad USD High Yield Corporate Bond ETF (USHY ) gathered $11 billion and $4.7 billion as some investors were willing to take on additional interest rate or credit risk. These funds are among the largest in their investment styles.
Active ETFs a Recent Catalyst
While known originally as a provider of index-based fixed income ETFs under the iShares brand, BlackRock also offers active fixed income ETFs in the U.S. The BlackRock Flexible Income ETF (BINC ) is the largest at $4 billion in assets. BINC is a multi-sector fund that seeks out the best opportunities in the fixed income market.
The firm also offers the BlackRock High Yield ETF (BRHY ) and the BlackRock Short Duration Bond ETF (NEAR ). These funds tap into the firm’s broader active management capabilities.
Growing Industrywide Supply of Fixed Income ETFs
BlackRock remains the global industry leader for fixed income ETFs, but the industry’s growth is also being aided by more recent entrants. Firms like Capital Group, Morgan Stanley, JPMorgan, Neuberger Berman, PIMCO and T. Rowe Price also recently brought some of their top fixed income managers into the ETF market. The growth of actively managed ETFs will be a tailwind for the industry. Many advisors and investors prefer to have experienced portfolio managers support their fixed income objectives.
For those that like low-cost index-based fixed income exposure, State Street Global Advisors, Vanguard, and VanEck also offer some great choices for US investors.
“While bond ETFs have become part of the fabric of the bond market, this is just the beginning. Bond ETFs represent just under 2% of the total fixed income market. We believe the growth of bond ETFs will continue to accelerate with global bond ETF AUM reaching $6 trillion by 2030 or sooner,” added Laipply.
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