Primed for Growth: Bond ETFs and the path to US$2 trillion

Bond ETFs have transformed how all investors access fixed income markets. But the movement is only beginning. Until iShares pioneered bond ETFs in 2002, ordinary investors had few low-cost options for building diversified bond portfolios on their own, especially in areas such as corporate and emerging-market debt. The first bond ETFs gave all investors efficient, convenient tools for targeting fixed income assets during the relevant trading day. Fast-forward to today and global bond ETF assets are growing 22% annually, more than three times the rate of open-end bond funds.3 There are more than 1,300 bond ETFs that trade across the globe. There is tremendous runway for growth. Even at US$1 trillion, bond ETF assets represent less than 1% of the US$105 trillion global fixed income marketplace. Growth is set to accelerate as all types of investors, from individuals to wealth managers to institutions, use bond ETFs in more and different ways.

Today, individual bonds are held largely by banks, central banks, and corporations—market participants that are just beginning to adopt bond ETFs.

How much and how fast? BlackRock believes that global bond ETF assets are well positioned to double, to US$2 trillion, by the end of 2024—thanks to four long-term trends, which we will examine in this paper.