Growing institutional interest is driving fixed income ETF flows

Global fixed income ETFs are enjoying robust growth, and that’s expected to continue over the next few years, according to BlackRock.

The asset management giant reported that global fixed income ETF assets grew by 30% in the past 12 months to a record US$1.3 trillion at the end of June.

The growth has been powered by “increased investor appetite for liquid, transparent and efficient access to the bond market,” the firm said, noting that 84% of the growth was due to net inflows.

“The versatility and resilience of the largest and most heavily traded fixed income ETFs, especially through market stresses this year, have made them more central to the construction of institutional investors’ portfolios,” said Salim Ramji, global head of iShares and index investments at BlackRock.

“Accelerated institutional adoption is further recognition that ETFs are modernizing the bond markets by increasing overall transparency, improving liquidity and lowering trading costs,” Ramji said.

Looking ahead, BlackRock expects fixed income ETF assets to top US$2 trillion by 2024, amid continued institutional interest.

“Fixed income ETFs helped the credit markets operate better during times of market stress, including the unprecedented turmoil seen earlier this year,” said Carolyn Weinberg, global head of iShares product at BlackRock.

“These ETFs contributed significantly to the financial ecosystem by providing additional liquidity and price discovery, relieving pressure from the underlying bond markets at a time when that was required,” she said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.