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Fixed income ETF market will exceed USD2trn in next decade, says iShares

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The global market for fixed income exchange-traded funds will likely grow to more than USD2trn in assets over the next decade, compared with USD302bn today, according to a market analysis released by iShares, the ETF business of BlackRock.



Over the same period, the US fixed income ETF category will likely grow to USD1.4trn in assets with EMEA and Asia taking the remaining USD600bn in assets, iShares projects.
 
Global market growth will be driven by the impact of changing demographics as more investors seek income producing investments, the ongoing evolution of the global bond markets and the discovery of fixed income ETFs by a widening investor universe, according to the firm’s analysis.
 
“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,” says Jennifer Grancio, head of iShares global business development at BlackRock. “Yet even after a decade of continuous growth, fixed income ETFs are still just scratching the surface of their potential.”
 
During 2012’s first half, fixed income exchange-traded products attracted USD40.8bn in net new assets, with flows into the products accounting for 40 per cent of all global ETP inflows, according to BlackRock’s latest ETP Landscape Report.
 
Alex Claringbull, senior fixed income portfolio manager for iShares EMEA, says: “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.”
 
iShares’ analysis and projections for the global fixed income ETF market are contained in the paper, “Transforming the Bond Markets with Fixed Income ETFs.”

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