“In this new ecosystem, bond ETFs are becoming really central to the way fixed income operates,” Stephen Cohen, head of fixed income beta at BlackRock, told the Financial Times. “In the old days if you wanted to own a portfolio of fixed income in order to deliver returns, owning lots and lots of bonds was actually quite straightforward — you could buy into and sell out of bonds quite easily. Now we are in a world where that becomes more and more challenging.”
Alternatively, the easy-to-use ETF investment vehicle has grown in popularity as a go-to choice for gaining bond market exposure. Notably, investors have funneled $33 billion into investment-grade bond ETFs over the first three quarters. Emerging market bond assets have also accumulated $15 billion in inflows and attracted record inflows over the third quarter.
“What we’ve noticed is a growing trend of investors going passive in the fixed income space,” Antoine Lesne, head of SPDR ETF Strategy & Research Emea, told FT, adding that the trend was not confined to indices that are “easy to replicate”.
“There’s been a growing trend of getting exposure to UK corporate, euro corporate, high yield and emerging market debt,” Lesne added.
For more information on ETF flows, visit our ETF performance reports category.