As investors prepare for interest rates to rise in the wake of the tapering of the Federal Reserve's bond buying, Greenwich Associates surveyed 110 institutional investors on their use of fixed-income exchange-traded funds (ETFs).

The Investment Company Institute estimated the value of assets in U.S.-based bond ETFs to be $246 billion as of December. Among the majority of respondents (54 percent) to the Greenwich Associates survey who currently use these vehicles, most do so because they're easy to use (cited by 81 percent) and provide quick access to funds (78 percent). The majority currently have less than 30 percent of their fixed-income portfolios in ETFs—for two in five of those who use them, ETFs account for less than 10 percent of the fixed-income portfolio.

When asked how their portfolios have changed over the past two years, only a quarter of respondents said they have either increased or decreased their fixed-income holdings by more than 10 percent. However, 65 percent have made significant changes to allocations within their fixed-income portfolios. Many have been moving funds out of U.S. Treasuries and into corporate bonds, international or emerging-market bonds, and high-yield or short-duration assets. They expect these trends to continue. (See Figure 1, below.)

Complete your profile to continue reading and get FREE access to Treasury & Risk, part of your ALM digital membership.

Your access to unlimited Treasury & Risk content isn’t changing.
Once you are an ALM digital member, you’ll receive:

  • Thought leadership on regulatory changes, economic trends, corporate success stories, and tactical solutions for treasurers, CFOs, risk managers, controllers, and other finance professionals
  • Informative weekly newsletter featuring news, analysis, real-world case studies, and other critical content
  • Educational webcasts, white papers, and ebooks from industry thought leaders
  • Critical coverage of the employee benefits and financial advisory markets on our other ALM sites, PropertyCasualty360 and ThinkAdvisor
NOT FOR REPRINT

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.