Consequently, Cerulli argued that the ETF industry may have an opportunity to grow demand for bond ETFs through greater education and awareness of the products available.
“Use of bond ETFs can be expanded not just through education on the mechanics of the vehicle, but also through rethinking bond portfolios in a more holistic and scalable fashion. Bond ETFs could be used in a variety of ways in this construct, including being paired with individual bonds or mutual funds,” according to a Cerulli Associates research note.
Moreover, the financial industry could proffer ways for advisors to incorporate ETFs into a diversified investment portfolio, especially with changing market and regulatory conditions ahead.
“Demonstrating to advisors how to build better and more consistent bond portfolios could lead to better client outcomes, which is especially relevant in a heightened regulatory climate,” according to Cerulli.
As more financial advisors familiarize themselves with fixed-income ETFs, the bond ETF category may attract greater inflows and increased usage among various investors, similar to how stock ETFs have grown to what we see today.
For more information on the fixed-income market, visit our Bond ETFs category.