Fixed-income exchange traded funds are continuing to grow in the global market with unparalleled growth acheived so far this year, according to Brett Pybus, a member of the product strategy team within BlackRock’s Fixed Income Portfolio Management Group.
Speaking today (21 May) at an event held by BlackRock in London, Mr Pybus, who is currently head of iShares EMEA Fixed Income Product Strategy, said that the fixed income ETF industry now stands at about $460bn (£293bn) globally.
“This is really reflective of what was a stand out 2014 when we had about $85bn (£54bn) come into the industry as a whole.”
So far this year, $46bn (£29bn) has come into the industry, and Mr Pybus said that this is tracking signficantly ahead of where the industry was last year, which was a record year in itself.
He added that iShares has seen about $23bn (£15bn) of this figure in the year to date, with roughly half of that business coming through Europe and hlaf from the US.
Mr Pybus noted that historically the ETF business growth has been much more dominated by US growth rather than European growth.
“The flows have been fairly broad based weve seen a lot of demand across sectors...but the two clear stand out winners have been investment grade credit and high yield so roughly $7.5bn (£5bn) and $10bn (£6bn) dollars respectively into those.”
“EM has been a little bit more muted, we’ve seen just under $2bn (£1bn) come into EM strategies broadly. Particualry more recently we’ve seen $2bn (£1bn) come into inflation linked bonds - this has mainly been in the US the rest of it has broadly been across a range of sovereign exposures.”
Mr Pybus added that one way to characterise what is driving the growth into ETFs, beyond the investment themes, are that broader secular trends continue to be supportive of investing and ETFs continue to be supportive of that so growth is continuing.
“On the fixed income side in particular we are seeing a marked increase in the conversations we have with institutional investors in particular so when we look - we weren’t having those conversations or we weren’t having them to the same degree so that points to new investors coming into the space.”
“The other way to sum it up is that the conversation has changed in the sense that a lot of investors are using these instruments as another tool in the toolkit so they are looking at them as instruments rather than fund products.
“The conversation has changed where it’s less of a mutual fund versus ETF for investors, it’s more of a ETF versus another product they could use in fixed income markets, so that type of conversation has definitely shifted in the last 6-18 months.”
ruth.gillbe@ft.com
