We are looking at new heights in all types of ways this week within our ETF newsletter. Firstly, we have an interview with relative value/long volatility hedge fund group, Ionic Capital Management’s Doug Fincher, who details the launch of their first ETF, utilising the firm’s proprietary inflation protection product.
“The genesis of this ETF product was the belief that inflation would be higher for longer,” Fincher says. This is a theme that the firm had expressed in its institutional portfolios. “The view was that as much as inflation was front and centre, we didn’t think there were any products out there that would service the need of retail investors in the event of high inflation for longer and the medicine for that, which is essentially high interest rates.”
This week brought news of new entrants to the user cohort for ETFs, with BlackRock’s 11th annual Global Insurance Report revealing that the insurers surveyed are also driving adoption of new investment approaches such as bond ETFs. Insurers report they plan to increase the use of fixed income ETFs in their portfolios, primarily to potentially improve liquidity (54 per cent) and yield (48 per cent).
According to BlackRock research, eight of the 10 largest US insurers now report using bond ETFs, with five having adopted them after the volatile markets of March 2020. And so far this year, BlackRock has identified 17 insurers throughout Europe, the Middle East, and Africa who are using ETFs for the first time. Given fixed income ETFs are often seen as efficient vehicles to generate yield and income in a low-cost and scalable way, BlackRock recently forecast that global bond ETF assets under management could reach USD5 trillion USD by 2030 – and insurance investors are a major driver of this new approach, the firm says.
And another study, this time from PwC Luxembourg, revealed that, between 2012 and June 2022, EU-domiciled ETFs have grown at a compound annual growth rate (CAGR) of 18.7 per cent, more than twice the rate of EU-domiciled UCITS (9 per cent) during the same period.
Encouraging numbers for the ETF industry.
Beverly Chandler, Managing Editor
Companies in this issue
BNP Paribas Asset Management
CI Global Asset Management
First Trust Advisors
Schwab Asset Management