“ETF sponsors are now focused on expanding their product suites to address the two concerns they hear from their customers – the advisors, managers and retail customers that buy their products – duration risk and diversification,” Colas added.
For instance, the top five most popular bond ETFs have an average duration of 5.9 years. Generally, you want to multiply the duration by the expected change in rates to get the move up or down for a bond security. With a wider range of durations to choose from, investors will be given a chance to adjust their duration risk depending on their interest rate views. [Risk Management with Corporate Bond ETFs]
Additionally, the majority of U.S.-listed bond ETFs cover U.S. debt. In response, the industry is beginning to add international or emerging market debt to help diversify the fixed-income options.
For more information on fixed-income assets, visit our bond ETFs category.
Max Chen contributed to this article.