Global bond ETF AUM passes $2 trillion milestone, doubling in just 4 years

Exponential growth has propelled and transformed the market says BlackRock.

The global fixed income ETF market has just reached a significant milestone with assets under management (AUM) now above US$2 trillion.

What makes that achievement more remarkable is the exponential growth seen in the last four years, doubling the $1 trillion AUM which took 17 years to achieve following the world’s first fund of its kind in 2002.

BlackRock notes that this growth has occurred against a backdrop of some of the most challenging bond market conditions in decades and the firm is predicting that the global bond ETF market could escalate further to AUM of $6 trillion by 2030.

“More of our growth is coming from professional investors choosing among our 500 iShares Fixed Income ETFs globally instead of buying individual bonds in a costlier and more cumbersome way,” said BlackRock’s head of iShares and Index Investments, Salim Ramji. “As ETFs are still only 2% of the total bond market, this milestone marks the start of something much bigger

The asset manager’s iShares leads the global fixed income industry with $76 billion inflows year-to-date with over 40% of industry inflows.

BlackRock believes that the next phase of growth will be achieved through a combination of four long-term trends:

Evolving 60/40 portfolios: Blending active and index strategies can help investors calibrate income, preserve capital, or diversity equity risk.

Seeking active returns: Institutions are turning to bond ETFs for their transparency, historically durable liquidity, efficiency, and increasingly granular access to fixed income exposures.

9 of the 10 largest asset managers use iShares fixed income ETFs
- 6 of the 10 largest insurers use iShares fixed income ETFs

Catalyzing bond markets: Bond ETFs are reshaping fixed income market structure by helping to drive electronification, algorithmic bond pricing, and portfolio trading

In 2022, portfolio trading volumes grew by 24% y/y in investment grade and 2% in high yield
- Last year, on average, 40% of investment grade bonds traded electronically and 30% of high yield bonds traded electronically

Customizing portfolios: Newer bond ETFs break down asset classes into more precise exposures, providing investors new ways to specifically define outcomes of broad-based investment grade strategies or access diversified sources of potential yield

TRANSFORMING THE MARKET

Ramji says that the asset class is also having a transformational impact on the bond market.

“What makes this milestone remarkable to me is not just the pace of growth but the way in which ETFs are being used as a technology to transform the bond market from analog to digital – making access to markets more transparent, more efficient and more liquid,” he said.

He added that bond ETFs are also changing the narrative from the outdated idea of active vs. index.

“Today, CIOs at wealth managers, asset managers and insurance companies are using fixed income ETFs to actively reposition their portfolios because ETFs can provide better access to more parts of the bond markets than ever before,” he said.