Assets in global fixed income ETFs have now surpassed USD 2trn. For many years, this ETF category has grown slowly compared to equity ETFs, but recently inflows have sped up. 

“This week, fixed income ETFs crossed USD 2trn in assets. In the two decades since iShares launched the first fixed income ETFs, it took 17 years for the category to reach USD 1trn in assets; the next trillion came just four years later, in some of the most challenging bond markets in decades,” Salim Ramji, Global Head of iShares and Index Investments at BlackRock, the world’s largest provider of exchange-traded funds (ETFs), in a commentary sent to AMWatch.

So far this year, iShares has seen net inflows to fixed income ETFs of USD 76bn, corresponding to more than 40% of industry inflows, according to the USD 9.4trn manager. 

According to Ramji, the increased demand shows that fixed income ETFs are transforming the bond market.

“Today, CIOs at wealth managers, asset managers and insurance companies are using fixed income ETFs to actively reposition their portfolios because ETFs can provide better access to more parts of the bond markets than ever before,” Ramji argues.

He says that most inflows to iShares fixed income come from professional investors that opt for the ETFs instead of buying individual bonds “in a costlier and more cumbersome way.”

“As ETFs are still only 2% of the total bond market, this milestone marks the start of something much bigger – we believe the fixed income ETF market will reach UTS 6trn by the end of the decade,” Ramji says. 

The global head of iShares believes the growth to be driven by four long-term trends: Evolving 60/40 portfolios, seeking active returns, catalyzing bond markets, and customizing portfolios. 

Ramji says that investors turn to bond ETFs for their transparency, historically durable liquidity, efficiency, and increasingly granular access to fixed income exposures.

According to BlackRock, nine of the ten largest asset managers are using iShares fixed income ETFs, while six of the ten largest insurers opt for this solution.