Despite record inflation clocking in at the end of the year, the bond space has managed to perform fairly strongly in 2021 and has seen enormous flows into many of the top ETFs within the space. The following are the five most sought-after fixed-income ETFs by investors this year by inflows.
1. The Vanguard Total Bond Market ETF (BND) has brought in $17.8 billion in flows year-to-date and invests broadly across the bond market. BND offers exposure to Treasury bills, corporate bonds, mortgage-backed securities, and agency bonds and weights heaviest into shorter maturities and is an excellent stepping-off point for broad bond exposure across a multitude of securities. BND carries an expense ratio of 0.04%.
2. The Vanguard Short-Term Bond ETF (BSV) brought in $13.2 billion YTD in flows and offered investors exposure to bonds across various types with a maturity between one and five years. As the fund carries low credit and interest rate risk, it generally offers low expected returns but is a preferred option to put assets into amidst volatility. BSV carries an expense ratio of 0.05%.
3. The iShares TIPS Bond ETF (TIP) garnered $11.4 billion in flows YTD and offers investors exposure to U.S. government bonds with adjustable principal, depending on inflation measurements. With inflation skyrocketing at the end of the year, it has been a popular choice for many investors looking for protection for their assets and is the most popular of the suite of TIPS ETFs that investors have flocked to in a high inflation environment. TIP carries an expense ratio of 0.19%.
4. The iShares Core Total USD Bond Market ETF (IUSB) had $10.7 billion in flows YTD and is another ETF that offers broad bond market exposure to investors but carries a higher risk profile than the U.S. Agg. The fund invests in investment grade and high yield bonds from corporations, Treasuries, mortgage-backed securities, and sovereigns and can include bonds from emerging markets. IUSB carries an expense ratio of 0.06%.
5. The Vanguard Total International Bond ETF (BNDX) has experienced $10.1 billion in flows YTD and offers investors exposure to investment-grade bonds that are denominated in foreign currency and hedged against fluctuations in currency using non-deliverable forward contracts. Most of the securities are in sovereign bonds. BNDX carries an expense ratio of 0.08%.
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