Even with the specter of rising rates, institutional investors are expected to boost exposure to bond ETFs, a theme that is true of these investors and the broader ETF space. At the end of last year, BlackRock forecast institutional investors would boost exposure to international equity and fixed income ETFs this year, which has proven to be an accurate prediction. [Institutions Increase use of ETFs]
“Based on the study, growth of ETF usage is expected to be robust. One-quarter of the institutions in the study—and 40% of the investment managers—plan to increase their use of bond ETFs in the coming 12 months, while none of the respondents said both more common among institutional investors and more important within institutional portfolios.
Overall, 59% of fixed-income ETF users reported that they have increased ETF usage since 2011,” according to the study.
Importantly, credit ETF volume is soaring. Since 2008, trading volumes of the five largest credit ETFs have grown 75x. This growth significantly outpaced the rise in total fund assets which have climbed 17x, according to the study.
Chart Courtesy: BlackRock, Greenwich Associates
Tom Lydon’s clients own shares of LQD.