Bond exchange-traded funds have transformed how investors – from individuals to institutions – access fixed income, and BlackRock believes the market will double to $2 trillion in the next five years.
The global bond exchange-traded fund (ETF) market, which crossed $1 trillion in June 2019, is set to double within the next five years, U.S. investment management firm BlackRock said in its report «Primed for Growth,» which looks at how the market has evolved since the first bond ETF was issued in 2002.
The report highlights four long-term trends that will push the global bond ETF market to $2 trillion by 2024: 1) the evolution of portfolio construction to focus on desired outcomes, asset allocations, and efficient ways to implement them; 2) growing adoption by institutional investors, which use bond ETFs for quick and efficient market access; 3) modernization of the bond market, which is using electronic trading to improve market liquidity; and 4) and product innovation, which is adding convenience for investors while providing tools for customizing portfolios.
Room for Growth
«We think they are poised for rapid growth over the next few years as clients continue to move beyond the “active versus passive” debate and use them as transparent building blocks for portfolio construction. Additionally, powerful advances in technology, market structure and product innovation will help lead more investors to bond ETFs for the first time,» Robert Kapito, BlackRock president, said about the evolution of the bond ETF market.
According to BlackRock data, there are 1,300 ETF bonds that trade globally, and their trading volume has grown 23 percent per year in the U.S. over the past decade. At the current level of $1 trillion, bond ETF assets represent only 1 percent of the $105 trillion global fixed income market, so there is ample room for growth, BlackRock said.
