U.S. Markets closed

Bond ETFs Will Continue to Grow in Low-Rate Market: Guggenheim


Financial advisors and investors will continue to use bond ETFs in 2012 “as a means of addressing the low-interest-rate environment and economic uncertainty,” says William Belden, head of product management at Guggenheim Investments.

“Fixed-income ETFs may offer enhanced liquidity, tax efficiency, convenience and transparency, helping advisors and their clients meet a range of investment objectives even as they face economic challenges in today’s financial market,” Belden wrote in an opinion column Friday for Ignites.com.

Taxable bond ETFs listed in the U.S. saw net inflows of $48.4 billion last year, according to data from Morningstar. The category ended 2012 with total assets of $225 billion, while the total ETF business stands at $1.35 trillion. [2012 was the Year of the Bond ETF]

Aside from the lower costs of fixed-income ETFs, advisors also like the products’ liquidity and convenience, Belden noted. The funds allow investors to buy a basket of bonds with one trade. [Navigating 2012’s Twists With Fixed Income ETFs]

“It appears that in fixed-income sectors, the ability to overcome some of the market’s opaqueness is high on advisors’ priority list — even higher than cost. ETFs offer much more convenient access to diversified fixed-income portfolios compared to portfolios consisting of individual bonds,” the Guggenheim executive wrote. [Will the Bond ETF Bubble Burst in 2013?]

“ETFs therefore may make it easier for advisors to implement a range of strategies, such as laddering, to address current headwinds, like interest rate risk and current income,” Belden added. [Defined-Maturity Bond ETFs to Manage Rate Risks]

Guggenheim is the ninth-largest ETF manager in the U.S. with total assets of $12 billion, according to Morningstar. The firm’s ETF lineup includes the BulletShares, which are “defined-maturity” funds that invest in corporate bonds. [Corporate Bond ETFs Target Specific Maturities]

The opinions and forecasts expressed herein are solely those of John Spence, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.