The fixed income exchange traded products market accounts for just 0.3% of the US$98 trillion (GBP61,660bn) global bond market, which suggest that there is ample room for future growth as per data from the Blackrock Investment Institute suggest.
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ETP inflows as a percentage of the underlying asset base are running at an annualized rate of 29.5% compared to 11.7% for mutual funds, and fixed income ETPs are only about 6% of the size of fixed income mutual funds.
A modest 1%penetration rate would boost fixed income ETP assets to US $1,000bn (GBP629bn).
Global fixed income ETP assets have rapidly grown to US$309bn (GBP194.4bn), delivering a 10 year compound annual growth rate of 57%. They account for 18% of global ETP assets, up from 7% in 2007.
Bond ETPs garnered a 35% share of inflows through July 2012, driving industry flows more than ever before. This growth meant that fixed income ETPs posted their strongest year-to-date inflows in history of US$44.4bn (GBP27.93bn), 94% above 2011’s comparable year-to-date figure of US$22.9bn (GBP14.41bn), according to Blackrock.
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By GlobalDataFurthermore, the ETP growth opportunity appears compelling in certain segments such as investment grade corporates, municipals and high yield where purchasing bonds can be more challenging due to pricing opacity and liquidity limitations.
Fixed income ETP inflows have displayed stamina through periods of both rising and fall of US interest rates, bolstering the case for continued growth through changing yield scenarios.
