Fixed-Income ETFs Poised For Bigger Use By Big Insitutional Fund Managers


Excerpt courtesy of Mar 1 ETF STRATEGY columnist Simon Smith, CFA

Fixed income ETFs are poised to take on a bigger role in institutional portfolios, according to a new report from Greenwich Associates.

Institutional investors are making sweeping changes to their fixed income portfolios in response to the post-crisis regulatory changes in the bond markets, current interest-rate environment and expectations of future rate increases.

The results of this new research, conducted at the end of 2013 by Greenwich Associates and sponsored by iShares, the ETF business of BlackRock, suggest that these responses could provide a significant boost to ETF use by institutions.

“As institutions move to shorten duration and find new sources of yield, current users of fixed income ETFs expect to increase their use of the product and some non-users will elect to employ ETFs in implementing their portfolio strategies,” said Greenwich Associates consultant Andrew McCollum.

The research demonstrates clearly that institutional investors experimenting with fixed income ETFs quickly begin increasing their use of and allocations to these products. About 60% of the institutional ETF users participating in the study allocate more than 10% of fixed income assets to ETFs, including almost one-third allocating between 10% and 30%.

For the entire story from ETF STRATEGY, please click here.