Bond ETFs Starting to Come to Market

The long-awaited fixed-income offerings in exchange-traded funds might be here soon, as ETF providers are starting to cover the bond market, similar to what they’ve done with stocks, according to Dow Jones.

“Those of us in the field using ETFs have wanted more bond products for years now, and not much had been available,” said Richard Ferri, chief executive at advisory firm Portfolio Solutions.

“It’s looking like 2007 could be the year of the fixed-income ETF, though, which would bring more choices and lower fees,” he noted.

Stock ETFs have become very popular, but there is a lack of similar bond offerings. At the end of November, just six of the 333 ETFs listed on the U.S. exchanges tracked bond indexes.

“After scores of international, sector and even strategy-based [stock] funds, we’re finally going to have some competition in the other half of the asset-allocation equation,” said Jim Wiandt, editor of trade publication Journal of Indexes. He added that a lack of bond indexes could be to blame.

Barclays Global Investors has monopolized the bond ETF market, with 14 total products, although that is likely to change as competition increases and more firms come to market with bond ETFs.

Vanguard Group recently said it’s starting its first bond ETFs structured as separate share classes of its existing mutual funds.

Chicago- based Morningstar said this month it plans to launch a proprietary family of investable bond indexes it wants to license as the basis of ETFs and other financial products.

 “We want to make bond index data more available,” said Eric Jacobson, Morningstar’s director of fixed-income strategies.

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.