Last week I wrote about the tradeoff inherent in some fixed income ETFs —one that most investors appear comfortable with.
Despite somewhat higher costs and a higher risk of tracking error, investors are pouring record money into bond ETFs as they navigate a challenging environment. Interest rate risk and a lack of product on the corporate and high yield side mean investors are looking for products that let them move in and out quickly and easily.
More of the same to report this week as the latest landscape study from BlackRock shows fixed income continuing to lead new money into ETFs. In October, global ETFs drew in $36.2 billion, with fixed income accounting for $14.7 billion of the total.
In the lead, high yield and investment grade corporate took in $6.1 billion and $4.4 billion of that respectively.
Fixed income ETF asset growth has already surpassed 2014 totals—and bond ETF assets have now shot past the $500 billion mark for the first time ever. The only outflows came from treasury funds, which saw outflows $1.2 billion.
Depending on what the U.S. Federal Reserve decides to do in December, ETFs focused on higher yielding fixed income assets will likely experience continued activity into next year.
Here’s another highlight from the report:
U.S. equities were another beneficiary of uncertainty over a rate hike and brightening economic prospects. All told, U.S. equity ETFs pulled in $10.3 billion as tech companies delivered solid earnings and M&A prospects began to heat up. In particular, investors showed optimism over large cap stocks—ETFs with a large cap focused pulled in $3.4 billion. ETFs focused on cyclical sectors like consumer staples and real estate drew an additional $4.7 billion.