Rate cuts and trade wars have been giving investors more than the necessary dosage of volatility as of late, but it opens up opportunities for fixed income exchange-traded fund (ETFs). For investors looking for that safe-haven bond exposure, it might be best to start with the largest provider of fixed income ETFs.
“Bond ETFs gathered a record $74 billion of net inflows in the first half of the year, including $26 billion in June alone,” wrote Todd Rosenbluth of CFRA Research. “While the growing adoption by wealth management and institutional investors is a boon for most asset managers, certain firms are favorably positioned relative to others. Using the new global ETF data and analytics from First Bridge Data, which CFRA acquired in August, we dig into the bond ETF business for leading asset managers.”
For investors who don’t know where to start in the bond arena, it might be best to begin with the largest provider of bond ETFs: iShares. Their expansive list of bond ETFs gives investors broad-based exposure and looks in to other corners of the bond market for opportunities.
“iShares, which is owned by Blackrock, was the largest provider of bond ETFs as of June 2019 with $358 billion in assets,” Rosenbluth added. “While the asset manager is the US ETF industry heavyweight with $1.6 trillion in assets and a leading 39% market share, iShares is even more dominant in the bond asset class with a 49% share. Indeed, the gap between iShares and Vanguard and SSGA, the next two largest ETF providers is much wider with bonds than overall”
Bonds: The Volatility Fix
Fixed income provides a buffer against stock market volatility by being a safe haven asset, particularly when market drawdowns occur.
It doesn’t matter if it’s in the long or short end of the yield curve, with violent market movements like those investors have been experiencing lately, it’s a reminder that a move to bonds can benefit any portfolio, especially those that are lacking in the fixed income department.
Investors looking to gain broad-based exposure to bonds can look at funds like the ProShares S&P 500 Bond ETF (NYSEArca: SPXB). The fund seeks investment results that track the performance of the S&P 500®/MarketAxess Investment Grade Corporate Bond Index, which consists exclusively of investment grade bonds issued by companies in the S&P 500.
It’s easy to overlook bonds as opposed to equities given their more static returns in nature as opposed to the more dynamic stocks that can move and shake when markets are roaring, as well as vice versa. While bonds may not be ideal for the adrenalin-fueled investor, they can still gain that much-needed fixed income exposure via exchange-traded funds.
For those looking for a reason to invest in bonds for pure gains, one can only look to the Bloomberg Barclays Aggregate Bond Index, which has been up every calendar year dating back to 1976. Furthermore, it experienced losses in only three of the last 42 years.
Investment-grade corporate bond-focused fixed-income ETF options include the iShares Intermediate Credit Bond ETF (NASDAQ: CIU), iShares iBoxx $ Invmt Grade Corp Bd ETF (NYSEArca: LQD) and Vanguard Interm-Term Corp Bd ETF (NASDAQ: VCIT). Investors looking for broad-based core bond exposure can look to a fund like the iShares Core US Aggregate Bond ETF (NYSEArca: AGG).