This might go down as the year of the fixed income exchange traded fund. Three of the top-10 asset-gathering ETFs on a year-to-date basis are bond ETFs.
In the fourth quarter, that number has thus far doubled to six and that is even with a stellar start to the quarter for U.S. equities. While still awaiting final numbers, it appears October was a record month for bond ETF inflows with $17.4 billion heading into last Friday’s session. That brings the year-to-date total to $47 billion.
Although high duration ETFs with exposure to the long end of the yield curve have flourished thanks to tumbling Treasury yields, low and ultra-low duration funds have been prodigious gatherers of assets as well. [Short Duration ETFs Lead Inflows]
ETFs such as the Vanguard Short-Term Bond ETF (NYSEArca: BSV) and the iShares 1-3 Year Treasury Bond ETF (NYSEArca: SHY), among others, have enjoyed plenty of fanfare. Another truly impressive low duration ETF, at least from an asset-gathering perspective, is the First Trust Enhanced Short Maturity Fund (NasdaqGM: FTSM).
Some investors may have heard about FTSM for the first time last week when it was reported that the actively managed ETF is lowering its fees and will soon be reverse split. [First Trust Shorty Maturity ETF to be Reverse Split]
That is not the real story behind FTSM. The real story is that the actively managed FTSM debuted in August and already has nearly $506 million in assets under management, a total exceeded by just one other ETF that has debuted this year.
That also means FTSM has needed less than three months of trading to become one of the largest actively managed ETFs. It is just speculation, but perhaps FTSM’s rapid success can be attributed to some advisors and institutional embracing the ETF in anticipation of an interest rate hike from the Federal Reserve next year.