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Global fixed income ETF market set to exceed $2tn in next decade

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The fixed income exchange traded funds market is set to grow to more than $2tn in assets over the next decade, according to a new report by Blackrock's iShares.

The global market for fixed income ETFs currently stands at $302bn today, but analysts predict that this is likely to grow to more than £2tn in assets over the next 10 years.

The report also predicts that the over the same period, the US fixed income ETF category will likely grow to $1.4tn in assets with EMEA and Asia taking the remaining $600bn in assets.

Jennifer Grancio, head of iShares global business development at BlackRock, said: “The dynamic forces driving the long-term expansion of the fixed income ETF market have been especially evident this year, with the market attracting some of its strongest asset flows to date.”

“Yet even after a decade of continuous growth, fixed income ETFs are still just scratching the surface of their potential.”

According to the firm’s analysis, global market growth is likely to be driven by the impact of changing demographics as more investors seek income producing investments, the on-going evolution of the global bond markets and the discovery of fixed income ETFs by a widening investor universe.

According to BlackRock’s latest ETP Landscape Report, this year saw fixed income exchange traded products (ETPs) attract $40.8bn in net new assets, with flows into the products accounting for 40% of all global ETP inflows.

Alex Claringbull, senior fixed income portfolio manager for iShares EMEA, said: “In today’s new world of investing, fixed income is no longer the same asset class it once was. iShares sees investors are increasingly diversifying their holdings by issuer and sector, credit quality, region and currency in an effort to secure new sources of income and to spread risk.

Claringbull continued: “ETFs started out offering access to equities, but there is increasing recognition that they are equally effective tools for fixed income investors who want to access new markets or implement active allocation decisions in an efficient and precise way using low cost, passive ETFs.” 

Blackrock say that for many investors, fixed income iShares can help improve the risk/return profile of their portfolios, and enable them to invest in markets outside of their core capabilities.

Specialist fixed income managers can also employ ETFs as an alternative to holding cash. For smaller professional investors, Blackrock say that fixed income

ETFs offer a way of investing in a market that can otherwise be challenging to access. Many bonds have high minimum investment criteria, which makes building and maintaining a diversified portfolio expensive and logistically demanding.”



Are ETFs an effective way to invest in fixed income?

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