Bond ETFs surpass $2 trillion milestone as asset growth 'explodes' - and BlackRock believes this is just the beginning
- Bond ETFs just hit a new milestone - with assets under management surpassing $2 trillion to reach a record.
- BlackRock, the world's largest asset manager, sees the sector tripling in size to $6 trillion by 2030.
The market for exchange-traded funds that invest in bonds is booming – the total value of such plans have just surged past $2 trillion to a new record.
It took the bond ETF industry, which came into existence in 2002, as many as 17 years to reach its first $1 trillion, but it saw the amount double in just 4 years, according to VettaFi, a firm that specializes in asset-management data and analytics.
BlackRock, the world's largest money manager, sees the market for bond ETFs tripling to $6 trillion by 2030, according to an investor presentation it released last month.
Surging inflows into debt-focused funds likely reflects increasing investor demand for the safety and stability of bonds in relation to the more volatile nature of riskier assets such as stocks. Flows into bond ETFs first started accelerating in the aftermath of the global financial crisis of 2008, which rocked risk assets worldwide, according to VettaFi.
But bond ETFs really took off during the more recent spells of market volatility – in early 2020, amid the outbreak of the COVID-19 pandemic, and then in 2022, when the Federal Reserve raised interest rates at a pace unseen in decades to quell inflation.
"We just passed this tremendous milestone," Todd Rosenbluth, head of research at VettaFi, said in a recent tweet, referring to the $2 trillion mark. Still, ETFs currently make up only a fraction of the vast $133 trillion bond market.
While the conventional bond market is driven by over-the-counter trades between institutions, ETFs, as indicated by their name, are traded on an exchange. A single ETF can given investors exposure to large numbers of bonds, thereby providing increased portfolio diversification and liquidity.
In the current economic climate, as US inflation cools and interest rates approach a peak, demand for fixed-income products is on the rise. The prospect of lower inflation and rates is positive for debt securities.