Christian Obrist
Bond ETFs are transforming how Australian investors access fixed income markets by bringing convenience and transparency to a historically hard-to-access asset class. At BlackRock, we see investors increasingly turning to fixed income ETFs for their rich diversity of exposures and good value.
In June 2019, bond ETF assets topped $1 trillion USD globally. In Australia, fixed income ETFs assets surpassed $5 billion AUD in September 2019, and the iShares Core Composite Bond ETF (ticker IAF) assets doubled in less than two years to surpass $1 billion AUD. Overall assets in iShares fixed income and cash ETFs doubled from $1 billion to $2 billion AUD in the last 12 months.
We see bond ETFs as a game-changing technology. Their straightforward format—an ETF is bought and sold on exchange—lets investors manage diversified bond holdings simply and efficiently. Pioneered by iShares in 2002, fixed income ETFs empower modern investors around the world to build robust portfolios to meet their investment objectives, including income and portfolio diversification.
Christian Obrist, Head of iShares, Australia, commented: “Investors are allocating to fixed income ETFs to provide ballast to their portfolios given falling cash rates and an uncertain macro backdrop. Doubling assets in less than two years, our flagship investment grade Australian bond ETF, IAF, has subsequently surpassed the significant $1 billion AUM threshold.”
Christian continued: “BlackRock forecasts global bond ETF assets to double to US $2 trillion by 2024 from US$1 trillion today driven by secular trends. Whilst global in nature, these trends – most notably the focus on portfolio construction – are playing out in Australia too.”
The next leg of growth will be driven by investors finding novel uses for these versatile tools. Individual savers will increasingly use bond ETFs to help generate income; asset managers, including BlackRock, will add them to strategies designed to beat their benchmarks; and asset owners such as pension funds will continue to rely on the greater liquidity and lower costs to execute complex portfolio strategies.
Additionally, powerful advances in technology, market structure and product innovation will continue to accelerate the bond ETF market and lead more investors to bond ETFs. We believe all investors stand to benefit.
