Market Overview

Bond Flow Aid The Ascents Of ETF Goliaths

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Bond Flow Aid The Ascents Of ETF Goliaths

Through the end of November, investors allocated $133 billion to fixed income exchange traded funds, putting bond ETFs on pace to out-gather equity ETFs on an annual basis for the first time since the dark days of the global financial crisis.

What To Know

Strong inflows to bond ETFs are benefiting two industry giants: BlackRock's (NYSE: BLK) iShares and Vanguard.

“Vanguard gathered $91 billion of net inflows thus far in 2019 and its market share of 34% was second only to iShares, which is owned by BlackRock (BLK) and pulled in $98 billion of new money (37% share),” CFRA Research Director of ETF & Mutual Fund Research Todd Rosenbluth wrote in a recent note.

As Rosenbluth notes, the gap between Vanguard's $91.21 billion in year-to-date inflows down to the next issuer – Charles Schwab (NYSE: SCHW) at $21 billion – is massive.

Why It's Important

Five of this year's top 10 ETFs in terms of new assets added are bond funds: two Vanguard funds and three iShares products. With $10.33 billion in 2019 inflows, the Vanguard Total International Bond ETF (NASDAQ: BNDX) is leading the way while indicating there is appetite among American investors for ex-U.S. bonds.

The Vanguard Total Bond Market ETF (NASDAQ: BND) and the iShares MBS ETF (NASDAQ: MBB) are other asset-gathering stars among bond funds.

“Aided by BNDX and BND inflows, as well as iShares MBS (MBB), ETFs tied to Bloomberg indexes gathered $62 billion of net inflows thus far in 2019, the most among the index firms,” Rosenbluth said. “It is more common with bond funds than stock ones for asset managers to not promote the index provider or name in the product name.”

What's Next

While iShares and Vanguard will continue looming large over the ETF industry, hope is not lost for other players, particularly those with strong brand recognition and distribution platforms, such as Goldman Sachs (NYSE: GS) and JPMorgan Chase (NYSE: JPM), two smaller, but growing ETF players.

Goldman Sachs ActiveBeta US Large Cap Equity ETF (NYSE: GSLC) and JPMorgan Ultra-Short Income ETF (NYSE: JPST) were among the 40 products with the highest net inflows in 2019,” Rosenbluth said.

As of Nov. 30, investors have added $9.70 billion to JPMorgan ETFs this year, good for the fifth-best total among U.S. sponsors.

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