Corporate bonds: the hidden gem of the Active ETF world

  • 17 October 2023 (7 min read)

Key points:

  • Global ETF assets under management have shown impressive resilience despite ongoing economic uncertainty in the past few years
  • A notable portion of inflows is attributable to product innovation in less explored areas for ETFs including active management, fixed income, and sustainability1
  • Many different types of investors are increasingly seeing a fundamental role for active fixed income ETFs in exposing their portfolios to the potentially attractive yields on offer across corporate bond markets
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Although passive equity continues to dominate global ETF AUM, investors now familiar with the potential benefits of the ETF structure – such as greater transparency and liquidity – are increasingly demanding more options for using ETFs in different ways.

This is driving significant growth across other segments of the ETF market. In particular, fixed income ETF AUM almost doubled in size between 2018 and 2022, while actively managed ETFs are also widely expected to see a rapid increase in demand over the coming years, and ESG remains as much in focus for ETF investors as elsewhere.2

In our view, the expansion of the ETF product line into previously untapped areas does not replace more traditional uses of ETFs such as indexed equity, but rather compliments this by offering exposure to a broader opportunity set within a diversified and responsibly-focused portfolio.

For example, investment grade (‘IG’) corporate bonds are less well-known than equities in the ETF space. However, they can work just as well for investors as a cost efficient and diversifying tool. Today, IG credit is experiencing strong demand amid the current environment of far more attractive yield potential than has been on offer for some time, without having to reach too far out along the risk spectrum.

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    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.

    Due to its simplification, this document is partial and opinions, estimates and forecasts herein are subjective and subject to change without notice. There is no guarantee forecasts made will come to pass. Data, figures, declarations, analysis, predictions and other information in this document is provided based on our state of knowledge at the time of creation of this document. Whilst every care is taken, no representation or warranty (including liability towards third parties), express or implied, is made as to the accuracy, reliability or completeness of the information contained herein. Reliance upon information in this material is at the sole discretion of the recipient. This material does not contain sufficient information to support an investment decision.

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