Industry Updates

Global aggregate bond ETFs in vogue as investors spread fixed income risk

Short-duration ETFs also see inflows

Tom Eckett

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There were big inflows for two global aggregate bond ETFs last week as investors looked to spread risk following significant falls in US equity markets.

According to data from Ultumus, the $1.6bn SPDR Bloomberg Barclays Global Aggregate Bond UCITS ETF (GLAG) saw $348m inflows in the week to 4 September while there were $151m positive net flows for the $1.2bn Vanguard Global Aggregate Bond UCITS ETF (VAGU).

Global aggregate ETFs offer investors exposure to AAA to BBB-rated bonds across a number of countries. For example, GLAG has a 36.9% weighting to the US, 14.8% to Japan and 6% to China.

The inflows show investors are looking to move into safer parts of the fixed income market following the wobble in US markets last week.

The Nasdaq 100 fell 5% last week with stocks such as Apple plummeting 8% in one day knocking $179bn off its market value.

The move into safer fixed income assets was also highlighted by inflows into short-duration bond ETFs last week. There were $251m inflows into the $3.4bn iShares $ Treasury Bond 0-1yr UCITS ETF (IB01) while the €1.8bn iShares € Corp Bond ex-Financials 1-5yr UCITS ETF EUR (IX5A) saw $141m inflows.

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According to the BlackRock Investment Institute, US Treasuries are still offering good value over the next six to 12 months as a play against the uncertainties around the pandemic and the US election. The US has seen over six million COVID-19 cases and 183,000 deaths as the country continues to struggle to deal with the virus.

However, Mike Pyle, global chief investment strategist at BlackRock Investment Institute, added: “Yet over the strategic horizon we advocate reducing allocation to nominal developed market government bonds as interest rates are near their lower bounds and medium-term inflation risks grow.”

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