Short-duration bond ETFs with less sensitivity to rising interest rates have been a favored destination for fixed income investors this year. Three of the top 10 ETFs in terms of year-to-date inflows, including the top two, are funds holding bonds with maturities of seven years of less. [Sifting Through Short-Duration ETFs]
“Institutions are re-examining their fixed income portfolios in light of an evolving market that is characterized by increased volatility, decreased liquidity and more challenging access. These trends are leading investors increasingly to fixed income ETFs as a way to source exposures, harness liquidity and efficiently implement desired investment strategies, said Matt Tucker, head of iShares fixed income investment strategy.
Among the various corners of the bond ETF market, U.S. Treasury funds are expected to see decreased usage over the next year with 30% of respondents to the Greenwich study saying they expect to reduce exposure to U.S. government bonds. Low duration or rate hedged funds are expected to see the biggest uptick in usage with 34% of respondents saying they will add exposure to those funds.
Twenty-four percent of respondents expect to increase exposure to high-yield and investment-grade corporates while 27% said they will boost allocations to emerging markets debt funds. [Big Inflows to Credit ETFs]
“The Greenwich report’s findings represent many of the conversations we have with institutions. They are making numerous portfolio changes and struggling with a more challenging bond market, which makes them open to using new investment tools,” said Daniel Gamba, head of iShares Americas Institutional Business.
