Fixed income exchange traded funds (ETFs) are gaining ground due to incrementally higher yields and greater investor comfort levels, reveals research firm Cerulli.
According to its latest ‘Cerulli Edge—U.S. Asset and Wealth Management Edition’, a strong product development opportunity exists for managers offering active fixed income exposures, given the white space for fee-competitive, attractively priced products.
While 66% cited greater “advisor familiarity” as a top asset growth driver in the next 24 months, 55% rooted for “institutional use”. Meanwhile, 38% chose higher yields and advisors’ need to access lower-cost fixed income exposures.
Fixed income product development (66%) emerged as a priority for asset managers, surpassing the US equity asset class (57%).
Cerulli expects fixed income ETF product development to follow two avenues, with some products becoming more targeted and offering access to niche allocations. The research firm estimates new fixed income ETFs to reflect mutual funds via more diversified exposures meant to provide a tax and price-efficient way to access fixed-income exposures for the long run.
Daniil Shapiro, director, Cerulli, commented: “This optimism is underscored by the perception of a virtuous cycle by which a greater variety of quality and appropriately priced exposures help make fixed income ETFs a go-to for a broader set of investors.”
