Two iShares products have become the first fixed income ETFs to break through the $10bn barrier for the first time this side of the pond, in another milestone for the European ETF industry.
In April, the iShares Core € Corp Bond UCITS ETF (IEAC) passed €10bn assets under management (AUM), following launch in March 2009, while the iShares JP Morgan EM Local Govt Bond UCITS ETF (IEML) crossed $10bn in assets in the same month.
Fixed income ETFs have seen strong inflows overall this year due to a more favourable backdrop for the asset class, driven largely by more dovish central banks, in particular, the Federal Reserve, which markets are anticipating will not raise rates at all this year, having previously signalled four at the end of 2018.
BlackRock said investors have been adopting a barbell approach, combining quality with higher risk allocations such as emerging market debt, in the fear they will miss out on returns as the market enters late cycle.
Brett Olson, head of fixed income, iShares, EMEA, at BlackRock commented: “Investors are demanding smarter, more resilient portfolios that are risk, time and cost efficient.
“As more investors look beyond bond selection to holistic portfolio construction, and to building defence for the next phase of the market cycle, we are seeing more indexing alongside other investment styles.
“These milestones are evidence of a shift in mind-set within in an industry undergoing fundamental change, with more and more investors using ETFs at the core of their portfolios.”
The positive backdrop was the reason global assets in fixed income ETPs broke through the $1trn barrier for the first time at the end of Q1. Bond ETFs currently total $982bn in assets while ETNs account for $30bn globally.
Despite remaining a small part of the overall ETP landscape, Henry Cobbe, head of research at Elston Consulting, predicted the growth in fixed income ETPs will continue as they offer bond exposure that is “targeted, diversified and liquid”.
BlackRock currently dominates the European ETF landscape through its iShares range, which they acquired from Barclays in 2009. The US giant now has $380bn AUM in Europe as at the end of Q1, according to data from Morningstar, accounting for 45% of the region’s assets.