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.