ETFs continue to soar in Australia and globally: BlackRock predicts global bond ETF assets to double to US$2 trillion by 2024


Christian Obrist

In a year plagued with market volatility risks, investors have continued to look to exchanged-traded funds (ETFs) to access liquidity and diversify risk. According to Christian Obrist, Head of iShares Australasia, Australia’s ETF growth has not only been driven by investors’ desire for exposure to global equities, but also the desire for exposure to bonds, which reached a milestone US$1 trillion global AUM in June 2019.

Christian said: “It took nearly two decades for bond ETFs to surpass $US1 trillion in global assets, however, I believe the next leg of growth will be swifter. ETFs bring convenience and transparency to a historically hard-to-navigate asset class and bond ETFs have transformed how investors can access fixed income by providing precision and transparency. At iShares, we see a tremendous runway for the growth of bond ETFs.”

Global bond ETF assets are currently growing at 20% annually, five times the rate of other open-end bond funds.[1] Yet even at US$1 trillion, bond ETF assets represent less than 1% of the US$105 trillion global fixed income marketplace. [2]

“Global bond ETF assets are well positioned to double to US$2 trillion by 2024. Investors are increasingly looking for alternative investment options to act as a shock absorber to their portfolios during periods of market volatility,” said Christian.

Commenting on Australian investors’ adoption of bond ETFs, Christian said: “Following the recent cash rate cut and the RBA signalling further cuts this year, we can expect term deposit rates will continue to dwindle. This makes bond ETFs an attractive option for individuals who currently have lazy cash sitting in bank savings accounts that could be potentially earning a higher return.”

Christian concluded: “Investors have realised bond ETFs are an efficient way to access different sources of return and manage risk. Individuals can use bond ETFs to help generate predictable income through laddering while professional portfolio managers can use high-yield bond ETFs alongside individual securities in actively managed funds.[3] Hedge funds can use ETFs for targeted long and short positions. In all cases, bond ETFs make it easy to build and manage fixed income allocations.”

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