FIXED INCOME ETFs

Explore how institutions leveraged ETFs in 2020 & how they plan to manage future volatility.

HOW INSTITUTIONS UTILIZE FIXED INCOME ETFs

TACTICAL ALLOCATIONS

Opportunistic exposure to specific asset classes, geographic regions, and maturity ranges.

LIQUIDITY & TRANSITION MANAGEMENT

A liquidity sleeve or buffer that maintains portfolio yield and beta exposure.

PORTFOLIO ENHANCEMENT

Factor and sustainable bond ETFs’ risk/return and resiliency characteristics can potentially be additive to portfolios.

DERIVATIVE REPLACEMENT

A straightforward complement or substitute to derivatives.

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THE ROLE ETFS CAN PLAY IN PORTFOLIOS

At our iShares Fixed Income Leaders Circle virtual event, Rob Kapito and Rick Rieder share their market outlook and investment implementation ideas.

LARRY FINK: Even at the most difficult times when we had one directional actions in most cases, and I'm talking about the second and third week of March, markets operated quite successfully…
….And I do believe that it was through the technology of ETFs and the foundation of what ETFs are providing, especially in the fixed income arena, has really allowed markets to operate more efficiently with a lot more liquidity.


RICK REIDER: Listen. I think it’s the most exciting period for investing and being in markets that anybody I’ve ever ... been doing this 35 years just because you’re – I mean we’re looking at new companies every day, new forms of business, new forms of how you utilize data.


ROB KAPITO: The world is swimming in cash. Many investors moved to cash at the beginning of COVID or due to various policies now have more cash savings than they did before. Global liquidity injections have shattered all previous records in response to the pandemic and this liquidity is fuel for both the real and financial economy. Add to that the fact that there is $18.3 trillion in negative yielding debt and less assets to buy and this landscape is resulting in historic demand for investment opportunities.


NARRATOR VO: In June of 2019, we proposed that global bond ETF assets would more than double in five years to $2 trillion. Since that time, growth has continued to accelerate, particularly during the market volatility of early 2020. As of March 31, 2021, global bond ETF assets currently stand at over $1.4 trillion. The modernization of the bond market continues to accelerate, as ETFs are increasingly integral in portfolio construction decisions by institutional investors.


DEL STAFFORD: Clients are faced with the prospect of lower rates for longer, compounded by high levels of cash. Whether we're speaking with a multi-asset portfolio manager where the category average is nearly 5% or within property casualty insurers, over the last three years the category average has exceeded 6% cash.


ISEULT CONLIN: The usage of a wide range of products in your portfolio that you may have not otherwise done or invested in, say five to ten years ago. So, I'm thinking, you know, in addition to sort of, you know, plain vanilla cash bonds, of course fixed income ETFs, TRS, and CDX. But in general, I think that evolution of utilizing more products in your portfolio construction is sort of here to stay and going to continue over the next few years.


ROB KAPITO: Bond ETFs are transforming the way fixed income portfolio managers construct bond portfolios and manage risk. And institutional clients, from pension funds to active managers, have recognized the versatility and resilience of fixed income ETFs and are accelerating adoption.


NARRATOR VO: To learn more, financial professionals and institutional investors can watch replays of iShares Fixed Income Leaders Circle: Shifting the Course on Bond Portfolios and explore resources from our partners.

LEARN MORE ABOUT FIXED INCOME ETF INVESTING






DERIVATIVE GUIDE

The modernization of bond markets has led to the growth of ETFs and a range of derivatives.

SETTING THE STANDARDS FOR FIXED INCOME ETF VALUATION

Simplify bond-like valuation for fixed income ETFs using the aggregate cash flow method.

Enhance transparency

Standardized valuation, quotation and trading increases transparency and liquidity.

Simplify comparisons

Compare ETFs, a portfolio of bonds, CDS indices, total return swaps and other fixed income instruments.

Speak one language

A common methodology for quoting and trading leads to increased trading volume and liquidity.

SIMPLIFY FIXED INCOME PORTFOLIO CONSTRUCTION

BlackRock's Liquid Beta tool makes finding the optimal iShares fixed income ETFs easy.