Bonds lag equities in ETF world
According to Blackrock the global market in bond ETFs has grown to over $459bn over the past 13 years, and appetite is growing, but it is still small when compared with the cash bond and mutual fund markets. Despite people tending to think that fixed income needs an active manager, the case is similar to equities, i.e. active managers, after costs, generally underperform the benchmark. A recent S&amp;P report stated that 75% showed that of actively managed emerging markets debt, high-yeild and government bond funds have underperformed over one, three and five years. Lack of choice has been an issue, but the recent introduction of currency hedged funds and smart-beta strategies will help.
While the equity market in exchange traded funds (ETFs) is well stocked, in the world of fixed-income the ETF market is lagging. We take a look at bond ETFs options and ask why innovation in smart beta for this sector is taking so long?

Why invest in bond ETFs?

Many providers say the impact of central bank's quantitative easing programmes and potential rate rises have driven unprecedented interest in bond ETFs this year. But are there enough products around?