Bonds have been getting a lot of love in the ETF space so far this year – especially a few niche and emerging areas in the fixed income space.
ETFs tracking junk-bond indexes saw investors push an additional $5.5 billion of cash into them this year – four times the $1.4 billion that high yield bond ETF saw during the same period in 2011.Investors’ appetite for junk makes sense – especially when you consider the dearth of AAA companies in the investment landscape these days. High yield bonds offer exposure to companies whose rating might just be down, but they’re definitely not out.
While high yield ETFs surged, iShares is stepping up their bond game with seven new targeted ETFs to help feed investors’ appetite for off the beaten track fixed income securities. The seven are:
Utilities Sector Bond Fund
Industrials Sector Bond Fund
Financials Sector Bond Fund
Barclays U.S. Treasury Bond Fund
Barclays GNMA Bond Fund (targets mortgage-backed pass-through securities issued by the Government National Mortgage Association)
Barclays CMBS Bond Fund (targets commercial real estate)
Aaa-A Rated Corporate Bond Fund
Investor interest in the broader fixed income universe is proof that low interest rates on treasuries and other government bonds are pushing the boundaries of bonds.
It’s an interesting transformation to watch given that just a decade ago fixed income was mainly limited to government bonds. Right now, the sheer number and range of fixed income products is making the bond space look like the equity space, where a diversified portfolio can be sliced and diced across a huge variety of countries, sectors and products.
Big changes in fixed income ETFs are a sign of the times with bond portfolios looking more like a typical stock portfolio. (Benefits Canada)