Bond ETFs Seen Hitting $2 Trillion
September 11th 2012 at 4:30pm by Tom Lydon
Income generating exchange traded products are one of the fastest expanding segments of the ETP universe and could account for $2 trillion in assets over the next decade, according to BlackRock.
In a research note, BlackRock, the money manager behind the iShares ETF line, expects global bond exchange traded products, which includes exchange traded funds and exchange traded notes, will have $500 billion in assets under management by 2014, $1 trillion in 2017 and $2 trillion over ten years. [ETF Assets Hit Record]
“We believe investor appetite for bond ETPs will continue over the coming decade spurred by the income needs of aging populations resulting in a larger allocation to Fixed Income assets,” the research note said.
Bond related ETFs have provided exposure to difficult to access segments of the fixed-income market. For example, investors seeking investment grade corporate bonds, municipals and high yield bonds face pricing opacity and liquidity concerns.
Globally, fixed-income ETPs have attracted $309 billion in assets, or 18% of all ETP assets, compared to 7% in 2007. Given that there is $98 trillion in the global bond market, ETPs still have a lot of room to cover – ETPs are only about 6% the size of fixed-income mutual funds.
Year-to-date, bond ETPs gained a 35% share of new assets, which helped ETPs post their strongest year-to-date inflows, ever.
“The case for continued Fixed-income ETP growth remains the strong over the coming decade supported by demographics in developed markets and investor demand for stable sources of income,” according to the note. “We expect more products, more investors and more Fixed-Income ETP assets for many years to come.”
For more information on bond funds, visit our bond ETFs category.
Max Chen contributed to this article.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.