The ETF Industry Continues to Thrive Despite Pandemic

It’s been a memorable year for exchange-traded funds (ETFs) in 2020, but despite the pandemic, certain sectors within the industry will continue to thrive. A CNBC report discussed three themes that were going on in the ETF space–namely fixed income, ESG, and risk-based strategies, according to Armando Senra, head of iShares Americas at BlackRock, during an interview on CNBC’s “ETF Edge.”

As the report noted, the “first is the flight to fixed income ETFs, on which BlackRock has been capitalizing for several years. The second is sustainable investing, which Senra said now represents 20% of iShares’ flows and has seen ‘very strong growth.'”

As far as ETFs go, the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG) has been the go-to fund for investors who want that core bond exposure since 2003. AGG seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index, which measures the performance of the total U.S. investment-grade bond market.

Additionally, fixed income investors may want to get exposure to debt with a twist via funds like the VanEck Vectors Fallen Angel High Yield Bond ETF (BATS: ANGL). ANGL seeks to replicate as closely as possible the price and yield performance of the ICE BofAML US Fallen Angel High Yield Index, which is comprised of below investment grade corporate bonds denominated in U.S. dollars that were rated investment grade at the time of issuance.

ANGL essentially focuses on debt that has fallen out of investment-grade favor and is now repurposed for high yield returns with the downgraded-to-junk status. Buying household corporate bond ETFs was to be expected by the Fed when they implemented their bond purchasing program earlier this year, but they mixed up their moves nicely with high yield debt purchases like ANGL.

ANGL Chart

ANGL data by YCharts

As for other trends, the article also noted that “investors have been making calculations on risk for the better part of 2020, Senra said.” Specifically, playing commodities and the movement of inflation.

“We’ve seen investors becoming more aware and concerned about inflation, and you’ve seen flows into commodity ETFs” and Treasury inflation-protected securities (TIPS) noted Senra.

Senra also pointed out that more investors are heading to opportunities overseas.

“Now, with the weaker dollar and also the underweight positions that most investors have to international, you’re beginning to see flows back into international,” Senra said. “So, I would say those are the main themes: fixed income ETFs, the growth of sustainable investing, and what you’ve seen this year in terms of risk-on and risk-off and how investors have played that out.”


For more market trends, visit ETF Trends.