Graphic: Fixed-income ETFs on the rise
While rapidly growing equity ETFs get the lion’s share of headlines, fixed-income ETF assets have grown even more quickly in the U.S., partly due to the increased liquidity that ETFs provide to fixed-income investors. Within fixed income, the aggregate, corporate and government bond ETF categories represent more than three-quarters of assets. Aggregate bond ETFs are the most popular option, with the most assets and attracting most of the inflows.
Big growth: Fixed-income ETF assets totaled more than $1.2 trillion at the end of the third quarter. While that lags equity ETFs’ total of $5.2 trillion, fixed-income ETF assets have increased seventeenfold since the start of 2009, vs. equity ETFs’ fifteenfold growth.
Year-end U.S. ETF assets by category (trillions)
Fixed-income leaders: Aggregate bond ETFs totaled more than $410 billion in assets as of Sept. 30, 33% of the fixed-income total. Corporate and government bond ETFs accounted for 26% and 17% of total fixed-income assets, respectively.
Year-end U.S. fixed-income ETF assets by category (billions)
Healthy flows: For the past couple of years, aggregate bond ETFs have generally seen the biggest inflows. Third-quarter flows into the category amounted to $23 billion. Inflows into inflation-protected funds have heated up in recent years, gathering almost $11 billion in the third quarter.
Fixed-income ETF quarterly flows by category (billions)
Two behemoths: BlackRock’s iShares Core U.S. Aggregate Bond ETF and the Vanguard Total Bond Market ETF have combined assets of more than $170 billion. Both ETFs underperformed their respective benchmarks for the five-year period ended Oct. 31: the iShares ETF by 8 basis points, Vanguard’s ETF by 7 basis points.
ETF performance
| iShares Core U.S. Aggregate Bond ETF | Vanguard Total Bond Market ETF | |
|---|---|---|
| One-year return | -0.41% | -0.44% |
| Underlying index | -0.48% | -0.46% |
| Three-year return | 5.53% | 5.67% |
| Underlying index | 5.63% | 5.72% |
| Five-year return | 3.02% | 3.08% |
| Underlying index | 3.10% | 3.15% |
2021 data are as of Sept. 30, except returns, which are as of Oct. 31. Sources: Bloomberg LP, Vanguard Group, BlackRock Inc.
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