Target Precise Fixed Income Exposure While Yields Are High

Despite the fixed income market being bigger than the equity market, most ETF assets under management are benchmarked to equity indexes. Most bond ETFs are confined to broad index classes. Few have the ability to offer precise exposure to different sectors. That’s where BondBloxx Investment Management comes into play.

Although the funds that fixed income specialist BondBloxx launched are passive, they offer precise entry points to bond markets. The company can help investors dial up or down risk, be it credit or interest rate risk. The firm can also help investors manage duration, liquidity, and their strategic cash positions.

“The income is back in fixed income,” said BondBloxx partner JoAnne Bianco during a recent webinar hosted by FLX Networks. “The high yield is back in high yield.”

Bianco added that bonds are “back from near zero interest rates in U.S. Treasuries, which is where they were before the Fed started its rate hike campaign.”

“So, where does that leave the fixed income market now? In a much higher yielding environment,” she added. “The difference this time is that there’s still resilient fundamentals for corporate bond issuers.”

See more: “Don’t Wait for Wider Spreads to Target Fixed Income

A Fund for Each Sector

In February 2022, BondBloxx launched seven industry sector-specific high-yield bond ETFs that offer precise, index-based exposure to the high yield asset class. These include the BondBloxx USD High Yield Bond Energy Sector ETF (XHYE) and the BondBloxx USD High Yield Bond Industrial Sector ETF (XHYI).

XHYE targets the energy sector. This included the exploration and production, gas distribution, oil field equipment and services, and oil refining and marketing sub-sectors. XHYI, meanwhile, targets basic materials, capital goods, transportation, and services sub-sectors.

The funds are passively managed and track rules-based sub-indexes of the ICE BofA US Cash Pay High Yield Constrained Index. They also allow investors to diversify and manage risk in the industry sector.

Launched in October of 2021 to provide precision ETF exposure for fixed income investors, BondBloxx offers a range of ETFs spanning U.S. Treasuries, industry- and credit rating-specific high yield bonds, and emerging markets bonds. BondBloxx announced that it exceeded $1 billion in assets under management a year after listing its first ETFs on the New York Stock Exchange.

“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.”

For more news, information, and analysis, visit the Institutional Income Strategies Channel.