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BGI says it has two-thirds of bond ETF market

GLOBAL – Barclays Global Investors says its exchange traded funds, iShares, have around two thirds of the $9bn (€6.9bn) fixed income ETF market.

Speaking on the sidelines of a conference organised by French business school Edhec in Geneva, BGI spokesman Robert Jenkins said iShares fixed has $6bn of the market. It was launched in Europe in 2003.

Demand has been fuelled by institutional investors and investment banks, Bruce Lavine, head of iShares Europe, told IPE.

“It is legally a mutual fund whose only holdings are bonds, but the innovation is that it is a basket of bonds that can now be traded across an equity platform,” Lavine explained.

“You buy a share whose underlying interest is a basket of bonds, you are buying a fund through an equity execution platform.”

He said the vehicle offers the accessibility of bonds in an unprecedented way, combining diversification and tradability of single security. “We are giving pure diversified high grade credit,” Lavine said.

But Lavine said fixed income ETFs are not a replacement for equities. “It is an easy way to buy bonds.”

But he conceded that the process of educating the fixed income community was still ongoing.

“You have to educate an entirely different community of users. You have an equity base of users that are familiar with ETFs now than you have fixed income managers who have only had two years.”

“It is an education process,” he said, adding that consultants also need to be given more information. “I think we need to do a better job in informing them consultants about the viability of the product. It is just a time issue.”

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