HONG KONG Feb 20 Flows into fixed income
exchange-traded funds (ETFs) are growing rapidly with Asian
institutional investors looking to earmark an increasing chunk
of their investments into such products this year, according to
a survey done by Greenwich Associates.
Among 59 institutional investors participating in the
research firm's survey, 44 percent said they plan to increase
allocations to bond ETFs this year, compared with 14 percent in
Geir Espeskog, head of ETF and index investment Asia-Pacific
distribution at BlackRock, said inflows from Asian clients have
surged "thanks to the ease of usage and greater international
Inflows for fixed income ETFs were around $7 billion in
2016, compared with about $2 billion the previous year, he said.
While gains for equity ETFs at the expense of active money
managers have been well documented, the recent popularity of
fixed income ones indicates Asian institutional investors are
turning towards such products in a bid to generate improved
In 2016, actively managed funds posted outflows of $92.3
billion globally, while index funds brought in a record $625.2
billion, with Vanguard, BlackRock and State Street grabbing the
top three spots in terms of net inflows, according to
BlackRock's Espeskog said the average spread in its U.S.
listed high-yield bond ETF stood at 1 basis point compared to
roughly 50 basis points on a single bond, highlighting the
desire among investors to buy such products to save costs and
time in trading them.
In the survey, more than half of the respondents said they
used ETFs to make tactical adjustments in their portfolios while
core allocation needs and international diversification
strategies came second and third.
A factor driving increased acceptance from Asian
institutional investors of ETFs is liquidity needs amid a
changing interest-rate environment.
While many expect the U.S. Federal Reserve to approve
multiple rate hikes this year, other major central banks such as
the Bank of Japan may resume monetary easing policies.
Among fixed-income ETFs, usage is highest in international
government bonds followed by international investment grade and
high yield credit respectively, according to the survey.
(Reporting by Saikat Chatterjee; Editing by Richard Borsuk)