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BlackRock reports global bond ETFs reached best quarter inflows

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Stephen Cohen, Head of Fixed Income Beta at BlackRock, reports that the global bond ETF industry achieved its best quarter on record with USD44.5 billion inflows in Q1 2017, remaining resilient despite a widely-anticipated Fed rate hike in March.

The previous record was set in Q1 2016 when the products attracted USD42.5 billion in assets. Globally, iShares captured USD20.3 billion, driven by investor appetite for investment grade credit, emerging market debt and treasury bond funds.

Cohen writes that despite a rate hike, US investment grade credit saw strong demand on the back of positive economic data. This sector saw USD14.4 billion of inflows.

Continuing the trend from the end of last year, investors continue to use inflation-linked exposures such as Treasury Inflation Protected Securities (TIPS) to protect portfolios against potential increases in inflation. TIPS ETFs globally attracted USD3.6 billion in flows during the first quarter.

Following the US election, emerging market bond and equity ETFs saw large outflows driven by concerns over a rise in protectionism, writes Cohen. This year, that situation has reversed, with flows intensifying over March, reaching USD15.6 billion inflows for the quarter.

While US investors remain happier with hard currency exposures, European investors were indifferent between dollar and local currency-denominated EM debt. Within the iShares European range emerging market debt ETFs, both local currency and hard currency, experienced the largest inflows of any asset class year to date.
 

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