BlackRock Projects Global Bond ETF Assets to Reach USD5 Trillion by 2030.

Faster investor adoption and novel bond ETF applications driving 23% annual growth rate.

Despite the most challenging fixed income market in decades, BlackRock projects that global bond exchange-traded funds (ETFs) assets under management (AUM) will triple to USD5 trillion by 2030.

The extreme market volatility in the early days of the pandemic reinforced the versatility of bond ETFs. As a result, over the past two years more wealth managers have put bond ETFs at the center of their portfolios and institutional adoption of bond ETFs has broadened and deepened.


“Bond ETFs have revolutionized fixed income investing as they provide instant access at transparent prices to hundreds of bond market exposures in ways that are accessible to all investors,” said Salim Ramji, Global Head of ETF and Index Investments at BlackRock. “Bond ETFs have grown by proving to be useful and resilient investment tools during various market conditions including near-zero interest rates, pandemic-related market stresses and inflationary pressures. Bond ETFs have overcome many tests, and they have become the catalyst of a more modern, more digital and more transparent bond market.”


BlackRock pioneered bond ETFs 20 years ago and what started as four products has grown 23% annually into a USD1.7 trillion industry with more than 1,400 products. Despite this growth, bond ETFs comprise just 2% of the USD124 trillion fixed income asset class.


Darren Wills, Head of APAC iShares Fixed Income and Institutional Index, said: “APAC investors continue to adopt bond ETFs as efficient building blocks for their fixed income allocation as they provide transparent, liquid, and precise access to global fixed income markets. Ongoing innovation that incorporates sustainability alongside new exposures to local fixed-income markets is set to accelerate that trend. ETFs currently account for just 0.5% of the total APAC bond market – and we believe the region has a major role to play in driving growth of global bond ETF assets.”


BlackRock’s new paper All systems go, published today, identifies four trends that we believe will help drive further adoption of bond ETFs, with details on trading dynamics, ETF usage patterns, market structure evolution, and implementation strategies of new investment concepts.


  1. Building blocks in evolved 60/40 portfolios: Bond ETFs’ market share in the fund industry is 24% compared to 14% five years ago as more investors are blending bond ETFs with active strategies, moving from one type of fixed income exposure to another, reframing the traditional 60/40 portfolio and bond construction in the process.
  1. Tools for seeking active returns: Institutional clients—from pensions funds to active managers— are among the fastest-growing adopters as they turn to bond ETFs to adapt their portfolios to changing market conditions, price individual bonds and portfolios, reduce transaction costs, manage liquidity, and hedge risk. Further tailwinds come from recent regulatory changes in the U.S., putting bond ETFs on a more level playing field with individual bonds and allowing U.S. insurers to use ETFs more freely. Eight of the 10 largest U.S. insurers use bond ETFs, and five of them started using them after the volatile markets of March 2020.
  2. Increasingly precise sources of potential returns: The number of bond ETFs available to trade has doubled since 2015 with the industry expanding investor choice from tracking broad market segments to providing more targeted exposures by region, credit risk or maturity to offering advanced strategies that incorporate active management. Investors are implementing these strategies alongside traditional bond ETFs, individual bonds and other fixed income instruments, and BlackRock believes this next generation of more active bond ETFs can reach USD1 trillion in AUM by 2030, up from about USD200 billion today. 
  3. Catalysts for modernizing bond markets: Market structure changes amid the 2008-2009 global financial crisis prompted the first wave of bond ETF adoption. Since then, the growth of bond ETFs and their ecosystem has helped drive advances in electronic trading and algorithmic pricing of individual bonds, improving transparency and liquidity in underlying bond markets. Electronic trading volumes in U.S. investment grade bonds at the end of March 2022 accounted for 36% of total traded volumes for those bonds, up from 21% in early 2019. Meanwhile, electronic trading volumes of European corporate bonds grew 61% between 2017 and 2020, reflecting the needs for smaller institutions, such as asset managers and wealth managers to seek alternative means of fixed income market access.


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