Fixed Income ETFs hit record levels

Feb 8th, 2012 | By | Category: Fixed Income

Global asset flows for exchange-traded products hit record levels during the month of January, confirming a continuing shift into ETPs globally, newly-released data show. A breakdown of the data reveals that fixed income ETFs, in particular, had an especially strong month.

Fixed Income ETFs hit record levels

Fixed income ETPs set a new global monthly record, attracting $9.0 billion in January 2012, up from the previous monthly record set of $6.7 billion set in January 2009.

According to the latest BlackRock Investment Institute “ETP Landscape” report, the global exchanged-traded product industry had its best month of January ever with $34.1 billion of net inflows, representing a 144% increase in inflows over the previous record set in January 2011 and up 116% from December 2011.

Standing out were fixed income ETPs, which set a new global monthly record, attracting $9.0 billion in January 2012, up from the previous monthly record set of $6.7 billion set in January 2009.

The strong inflows into fixed income ETPs suggest that investors are increasingly turning to higher yielding fixed income securities in an effort to help restore yield to their portfolios.

This demand was clearly seen in the likes of the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) and the SPDR Barclays Capital High Yield Bond ETF (JNK), which collected $2.2 billion and $1.5 billion respectively in January.

Peter Fisher, Senior Managing Director and head of Fixed Income Portfolio Management at BlackRock, said, “In this challenging environment with sustained levels of low yield, now more than ever investors are looking for new ways to generate income. We see a quiet revolution building in the asset class as more and more investors learn how to use fixed income ETFs to build portfolios that combine low risk with the potential for yield.”

In the ten years since the first ever fixed income ETF was created, fixed income ETFs have helped democratise access to fixed income markets by creating new centres of transparent liquidity and offering investors a cost-efficient way to express a view on specific fixed income sectors.

Today, there are literally dozens of various fixed income ETFs available to investors, offering cheap access to a wide range of fixed income markets, including government, corporate, high yield, emerging market and municipal debt. Issuers active in the sector include big names such iShares, SSgA (SPDRs), Vanguard and PIMCO, as well as more niche players such as Guggenheim, Market Vectors and Direxion.

Matt Tucker, Head of iShares Fixed Income Investment Strategy, said, “we’re thrilled to see institutional and retail investors embracing the benefits of these products. Passive fixed income ETFs are essential building blocks of a portfolio and make particular sense during this period of historically low yield.”

Growth in this space shows no sign of letting up. Indeed, iShares is prepping the market for a further six fixed income ETF offerings scheduled for launch later this month. The new funds are the iShares Barclays US Treasury Bond Fund, the iShares Barclays CMBS Bond Fund and the iShares Aaa – A Rated Corporate Bond Fund, plus three corporate sector bond funds tracking financials, industrials, and utilities. In addition, in what will be the most high-profile launch of the year so far, Pimco is planning an ETF version of the hugely popular Pimco Total Return Fund.

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