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Institutional investors racking up bond ETFs: BlackRock

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The asset management giant has forecast that institutional investors will double fixed-income ETF assets in the next four years, after it saw the segment grow by 30 per cent in the last 12 months.

BlackRock has projected that institutional investors will expand global fixed-income ETF assets to US$2 trillion ($2.8 trillion) by 2024, from the segment’s current 1 per cent market share of the US$100 trillion ($142 trillion) global fixed-income securities market. 

The sector has around 1,690 ETFs according to a new report from BlackRock’s ETF business iShares, which ended June at US$1.3 trillion in assets under management. 

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Most of the growth, at 84 per cent, came from inflows, with the BlackRock group reporting a spike in interest from pension funds and active managers. 

iShares added US$105 billion to its fixed-income segment during the year to 30 June.

The group saw record inflows during the last quarter, including US$57 billion into iShares, were a result of bond investors increasing using ETFs to reposition portfolios in light of changing market conditions and to price individual bonds portfolios as well as reduce transaction costs. 

Globally, BlackRock counted more than 60 pension funds, insurers and asset managers which were first-time buyers of iShares fixed-income ETFs, collectively adding around US$10 billion in assets to the business. 

Salim Ramji, global head of iShares and index investments at BlackRock said the “versatility and resilience” of the most heavily traded fixed-income ETFs through the COVID volatility made them more central to institutional portfolio construction. 

“Accelerated institutional adoption is further recognition that ETFs are modernising the bond markets by increasing overall transparency, improving liquidity and lowering trading costs,” Mr Ramji said. 

Carolyn Weinberg, global head of iShares product at BlackRock said the products helped the credit markets operate more smoothly during the market stress. 

“These ETFs contributed significantly to the financial ecosystem by providing additional liquidity and price discovery, relieving pressure from the underlying bond markets at a [time] when that was required,” Ms Weinberg said.

 

Institutional investors racking up bond ETFs: BlackRock
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Sarah Simpkins

Sarah Simpkins

Sarah Simpkins is a journalist at Momentum Media, reporting primarily on banking, financial services and wealth. 

Prior to joining the team in 2018, Sarah worked in trade media and produced stories for a current affairs program on community radio. 

You can contact her on [email protected].

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