The exchange traded fund universe has quickly expanded, and iShares projects the fixed-income segment of the industry to burgeon sevenfold over the next decade, and that is just the “conservative” number.
The ETF provider anticipates U.S. fixed-income ETF assets to rise $1.4 trillion and global ETF assets to gain $2 trillion in the next 10 years, reports Jackie Noblett for Ignites. [Bond ETF Market Forecast to Hit $2 Trillion]
“I actually think that might be a conservative estimate,” Matt Tucker, head of fixed-income investment strategy at iShares, said in the Ignites interview. “I think when people look at this number initially, they look at it and say, well, if you look at how big the market is today, it’s about $300 billion globally for ETF assets in fixed income, you look at that and it’s about a seven, six to sevenfold increase over the next decade.”
Still, the numbers don’t seem that farfetched, given the growth trajectory ETFs have already experienced.
“But if you actually take the growth rates of the last couple of years, you can actually extrapolate out to that level,” Tucker added. “So we’re kind of calling for the industry to continue to grow at its current pace.”
Going forward, Tucker points to growing interest as a institutional, capital markets instrument. Additionally, given the $50 trillion in the fixed-income market globally, there is a lot of room for ETFs to make their move on.
“So you’re only talking about 4% ownership or 4% position of ETFs in that market, which I think is actually fairly reasonable,” Tucker said.
With interest rates as low as they are now, chances are that interest rates will sooner or later begin to shift upward, but interest in fixed-income ETFs will remain. For instance, Tucker points to the aging population and the desire to keep fixed-income assets toward retirement; fixed-income investors are becoming more globally minded, using ETFs to access international debt; lastly, investors are seeing fixed-income ETFs as a true institutional instrument for accessing fixed-income.
“And so really, when I think about these three trends, I think that these are the longer-term structural changes in the fixed-income market,” he added.
For more information on fixed-income assets, visit our bond ETFs category.
Max Chen contributed to this article.