The combination of investors’ love affair with exchange-traded funds and their renewed interest in fixed income in the wake of the market downturn is creating a field day for bond exchange-traded funds, The Wall Street Journal reports.
Financial advisers are recommending the asset class as a low-cost way to diversify the fixed income portion of a portfolio, while delivering some precise stability.
“This opens up the door for investors to do asset allocation and sector rotation strategies with fixed income ETFs,” said Matt Tucker, head of U.S. fixed income investment strategy for the iShares line of ETFs at Barclays. “Investors are looking for some way to protect against inflation. ETFs provide pure, diversified exposure to the TIPS market.”
Of the 740 ETFs with nearly $600 billion in assets, bond ETFs account for only 63 funds with $78 billion under management. But with PIMCO entering the ETF market, and Vanguard continuing to offer bond ETFs, those assets could explode.