Market Overview

How Bond ETF Flows Affect ETF Sponsors

How Bond ETF Flows Affect ETF Sponsors

Less than three months into 2016, at least one thing is clear about exchange-traded fund flows: Advisors and investors love bond funds. That much is highlighted by the fact that six of this year's top 10 asset-gathering ETFs are fixed income funds.

However, distribution of fixed income ETF flows is not equal, and the impact of those varies from ETF sponsor to sponsor. BlackRock, Inc. (NYSE: BLK)'s iShares unit, the world's largest ETF issuer, continues to widen its bond ETF lead over rivals.


“BlackRock's iShares products widened their lead in investor usage of fixed income, the most popular category. Amid increased market volatility, the steady income stream of low-cost products resonated last month and generated a tailwind for the division of BlackRock,” said S&P Capital IQ in a note out Tuesday.

Related Link: Boring Bonds Boost ETF Asset Growth

“According to FactSet data, iShares U.S. fixed income ETFs gathered $7 billion of fresh money in February, while the broader industry pulled in $9 billion. The 78 percent inflow market share for the iShares firm was much stronger than the overall 56 percent the firm has in overall assets.”

Year-to-date, five of the six bond ETFs that are among the top 10 asset gatherers are iShares funds, with the exception being the SPDR Barclays Capital High Yield Bnd ETF (NYSE: JNK), the second-largest high-yield corporate bond ETF.

As of March 8, not bond ETF had added as much in the way of new assets as the iShares 20+ Yr Treas.Bond (ETF) (NASDAQ: TLT), which has raked in nearly $2.5 billion this year.

Professional investors are expected to boost their usage of fixed-income ETFs with nearly two-thirds already owning bond ETFs, according to a recent Greenwich Associates study.

“S&P Global Market Intelligence also thinks the iShares dominance last month stemmed from its broad suite of U.S. fixed income products. iShares offers 69 such ETFs, including a number of investment-grade and duration specific Treasury focused ones, enabling institutional and retail investors to take on a more precise amount of risk. Indeed, nine ETFs pulled in more than $200 million of fresh money in February,” said S&P Capital IQ.


Vanguard, the second-largest U.S. ETF issuer behind iShares, controls nearly a quarter of the U.S. bond ETF market. Its Vanguard Total Bond Market ETF (NYSE: BND) duels with the iShares Core U.S. Aggregate Bond Fund (NYSE: AGG) for the title of largest U.S bond ETF, a crown currently worn by AGG.

Image Credit: Public Domain


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