The assets held by fixed-income exchange traded funds (ETFs) are expected to reach $2 trillion by 2022, according to leading ETF manager iShares. The growing investment in these fixed-income financial instruments could be of interest to young investors who are looking to build a portfolio.
Fixed-income ETF assets
There are $309 billion in assets held by fixed-income ETFs worldwide, according to The Financial Times. This figure accounts for only 0.3 percent of the global market for bonds, compared to the 5 percent share of this market held by bonds.
iShares predicts that these funds will account for 1 percent of the bond market in the next five years, which will increase their assets to approximately $1 trillion, according to the news source. In contrast, ETFs comprise approximately 2.2 percent of the global market for equities.
"Most fixed income investors have barely even scratched the surface of ETFs," Joe Linhares, head of iShares EMEA stated, the media outlet reports. "Using ETFs to put cash to work in stock markets is extremely widespread but even that simple application of ETFs has barely started in fixed income markets."
Source of new inflows
Corporate data provided by financial services giant BlackRock indicates that new net investor inflows into fixed-income ETFs totaled $44.4 billion during the first seven months of 2012, which represented a 94 percent gain from the same period in 2011, according to the news source.
A total of 14 percent of the inflows that went into funds of this type in 2011 and 2012 came from new launches, the media outlet reports. Dodd Kittsley, global head of ETP research for BlackRock, has stated that the strong performance of these newly-launched funds should provide financial firms with greater incentive to offer more products like this.
ETF rises worldwide
The rising investments into fixed-income ETFs comes as these funds continue to increase their assets under management, according to The Financial Times. Data provided by BlackRock indicates that ETFs experienced net inflows of $127.7 billion during the first eight months of 2012, which represented a 15.7 percent increase from the same period in 2011. These strong inflows have pushed the total assets that ETFs have under management to a record level of $1.8 trillion and various market participants expect this figure to grow.