More Institutions Turning to ETFs for High-Yield Fixed Income

Fixed income ETFs, particularly non-core fixed income, “play an expanded role in portfolio construction” for institutional investors, according to the results of a survey conducted by State Street Global Advisors.

Per the report, “The Role of ETFs in a New Fixed Income Landscape,” of the 700 global institutional investors SSGA surveyed that plan to increase their exposure to high-yield corporate debt over the next 12 months, 62% will likely do so through ETFs. By comparison, the 2021 fixed-income survey found that only 27% of investors were making significant use of ETFs to build their allocations to non-core fixed income like high yield.

“The increase from just over a year ago is remarkable,” the report said.

This trend is even more pronounced among larger institutions. Among the respondents with more than $10 billion in assets, 68% said they are likely to use ETFs to build new exposures to high-yield corporate credit.

Launched in October of 2021 to provide precision ETF exposure for fixed income investors, BondBloxx Investment Management was co-founded by ETF industry leaders Leland Clemons, Joanna Gallegos, Tony Kelly, Mark Miller, Brian O’Donnell, and Elya Schwartzman. The team has collectively built and launched over 350 ETFs at firms including BlackRock, JPMorgan, State Street, Northern Trust, and HSBC.

“Our conversations with investors have reinforced what we already knew – there is significant demand for more targeted fixed income products,” said Kelly. “Our initial product suites aim to create a full toolkit for high-yield investors looking to implement their specific views on the market, and we anticipate extending this approach to other fixed income asset classes.”

Since February, BondBloxx has launched 19 high-yield products, including eight target-duration U.S. Treasury ETFsseven industry sector-specific high-yield bond ETFsthree ratings-specific high-yield bond ETFs, and one short-duration emerging market bond ETF.

“BondBloxx has continued to launch innovative products since its founding and has expanded the ETF universe with targeted products where there is white space,” said Todd Rosenbluth, head of research at VettaFi. “Their broad range of fixed income funds makes them a firm to watch as the asset category grows.”

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