Industry Updates

ETF Wrap: Record-breaking year for bond ETFs

Record-breaking flows into fixed income, issuers avoiding the UK market and ETFs returning over 100% made headlines this week

Jamie Gordon

This week saw fixed income ETFs in Europe hit all-time-high annual inflows, breaking the previous record set in 2019.

Bond ETFs amassed $65bn net new assets by mid-December as investors chose ETFs to implement the ‘bonds are back’ trade, after the asset class suffered one of its worst years in 2022.

While some broad bond indices fell by up to 30% last year, November saw the Bloomberg Global Aggregate bond index gain 5%, marking its second-best month in 30 years.

Eyes now turn to when the Federal Reserve and other policymakers will start cutting rates, with 83% of professional investors in a recent ETF Stream survey stating 2024 would be the year of fixed income versus just 40% for equities.

Brexit fragmentation risks 

Next, three key issuers have yet to register their new Irish platforms in the UK – in an unintended consequence of Brexit.

Amundi and AXA Investment Managers launched their ICAVs last year but have not yet registered the ETFs on the platforms in the UK.

Elsewhere, BNP Paribas Asset Management also launched its ICAV last year and is currently undergoing the lengthy process of registering in the UK.

ETFs gaining over 100% 

Finally, three ETFs have gained over 100% this year, led by the VanEck Crypto & Blockchain Innovators UCITS ETF (DAPP) with 182% gains and followed by rival products from Global X and BlackRock.

While DAPP has a highly concentrated basket, Invesco’s blockchain ETF has almost twice as many constituents and has booked more modest gains of 33%, owing to its more tangential exposure to blockchain technologies.

ETF Wrap is a weekly digest of the top stories on ETF Stream

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