Bond investors are shying away from actively managed mutual funds and favoring an index-based approach found in many exchange traded funds, according to industry data.
According to a report from ETF manager BlackRock, fixed-income products garnered $43.6 billion in inflows year-to-date, or 31.6% of total exchange traded product inflows. In November, fixed-income ETPs added $3.7 billion in new assets. [ETFs See November Outflows]
Global ETPs also made up 33% of all new cash flows into all bond funds for the first three quarters of the year. In contrast, bond ETPs accounted for 11% and 10% in new cash flows into bond strategies for 2009 and 2010, respectively.
Meanwhile, actively managed bond funds saw inflows of $70 billion over the first three quarters of 2011, compared with $200 billion in the year-ago period.
“In the current and extended low-yield environment, we believe that ETPs are attracting huge interest from investors who are eager to seek yield, manage their costs and generally have more control over their fixed income investments,” Kevin Feldman, Managing Director at BlackRock, said in the report. “This is a truly revolutionary development, signalling that an indexed approach to fixed income investing is becoming as commonplace and as valued as an indexed approach is in the equities space.”
Fixed-income ETPs have grown to 591 from 122 offerings in 2007. Over 110 new fixed-income products have launched this year alone.
“Providers will be looking at ways they can offer both broad and niche exposures to global bond markets,” Feldman added, “and this will allow investors to implement customized fixed income asset allocations that mix sectors, geographies, and risk profiles much as they do today for equities.”
iShares Barclays Aggregate Bond (NYSEArca: AGG)
For more information on the bonds market, 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.