Income ETF market will pass $2 trillion in next decade: iShares

Investor demand will drive growth

Coins, growth, chart Coins, growth, chart

The global market for fixed income exchange traded funds (ETFs) will likely grow to more than $2 trillion in assets over the next decade, compared with $302 billion today, according to a new market analysis released today by iShares, the ETF business of BlackRock, Inc. (NYSE:BLK). Over the same period, the US fixed income ETF category will likely grow to $1.4 trillion in assets, compared with $222 billion today, iShares projects.

Global market growth will be driven by the impact of changing demographics as more investors seek income producing investments, the ongoing evolution of the global bond markets and the discovery of fixed income ETFs by a widening investor universe, according to the firm’s analysis.

“The dynamic forces driving the long-term expansion of the fixed income ETF market have been especially evident this year, with the market attracting some of its strongest asset flows to date,” said Jennifer Grancio, Head of iShares Global Business Development at BlackRock. “Yet even after a decade of continuous growth, fixed income ETFs are still just scratching the surface of their potential.”

During 2012’s first half, fixed income exchange traded products (ETPs) attracted $40.8 billion in net new assets, with flows into the products accounting for 40 percent of all global ETP inflows, according to BlackRock’s latest ETP Landscape Report.

“When iShares launched the iBoxx $ Investment Grade Corporate Bond Fund (LQD) in July 2002, it forever changed the way investors could access the bond markets -- on an exchange, with clarity of pricing and observable liquidity,” said Matthew Tucker, Head of iShares Fixed Income Investment Strategy at BlackRock. “As fixed income ETFs continue to be more fully embraced by individuals, advisors and financial institutions, they will solidify their standing as an essential fixed income capital market instrument, in a truly evolutionary step for the market.”

iShares’ analysis and projections for the global fixed income ETF market are contained in the paper, “Transforming the Bond Markets with Fixed Income ETFs,” authored by Tucker and Grancio to mark the 10th anniversary of the introduction of the industry’s first such ETFs by iShares in July 2002. Tucker and Grancio were both members of the iShares team working to develop and bring the first fixed income ETFs to market in 2002.

For the complete “Transforming the Bond Markets with Fixed Income ETFs” paper, go to www.iShares.com.

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