53% of investors expect assets under management in fixed income ETFs to grow by 167% between 2016 and 2020….
Low cost and easier access to markets are key drivers behind growth
64% of investors believe there will be 500 or more fixed income ETFs listed in Europe by 2020
New research (1) conducted amongst institutional investors and wealth managers suggests there will be a huge increase in the number of fixed income ETFs launched in Europe over the next three years.
There are currently around 400 fixed income ETFs listed in Europe. However, the survey, which was conducted by Tabula Investment Management, a new European fixed income ETF provider, reveals 64% of those interviewed anticipate there will be 500 or more by 2020. Some 17% believe the number will be between 750 and 1,000 and 9% anticipate there will be over 1,000 fixed income ETFs listed in Europe by 2020.
Tabula highlights that this could result in large number of ‘copy-cat’ fixed income ETFs launched, all offering much the same investment propositions. It is calling for a greater focus on innovation in order to address the needs of fixed income investors.
Tabula’s research reveals just over half (53%) of those interviewed expect the amount invested globally in fixed income ETFs to reach $1.6 trillion by the end of 2020 – a rise of 167% on 2016.
In terms of what the biggest drivers are behind this growth, 67% of institutional investors and wealth managers say low cost, followed by 52% who say it’s the ease of access they provide to markets. One in four (24%) say it’s the transparency and intra-day access that they offer.
The findings also reveal that fixed income ETFs will take a bigger share of overall flows into the wider ETF market. Currently, around 23% of assets invested in ETFs track fixed income exposure. Last year fixed income ETFs accounted for 26% of overall flows into the sector. 43% of those interviewed expect flows to be 30% or more by 2020, and only 22% think it will be below last year’s levels.
Michael John Lytle, Chief Executive, Tabula Investment Management commented: “There is a strong belief among professional investors that demand for fixed income ETFs will increase dramatically over the next few years. This is likely to lead to a significant expansion in the number of products that are launched. I am concerned that a lack of innovation will mean that many of these products will offer very similar exposure to those that already exist. The palpable opportunity in this market lies in developing new products that deliver precise exposure and address the specific needs of fixed income investors. We are aiming to tackle these issues when we launch our first products.”
 Tabula Investment Management commissioned PollRight to conduct research with professional investors including asset managers, pension funds, insurance companies, private banks and wealth managers. 55 investors took part in the survey in April 2018.