Why 2022 could be an even better year for active fixed income ETFs
LThe past year has been a banner year for ETFs, with net inflows of $ 910 billion in US-listed ETFs, and it has set a benchmark that will be hard to beat in 2022. Equity ETFs have brought the lion’s share of flows for the year to $ 692 billion, which is not surprising given the number of record-breaking closings for major US exchanges last year.
However, with the trend reversal in the second half of the year, active ETFs saw their flows increase, and the trend is expected to continue in 2022, especially in the fixed income arena, believes Todd Rosenbluth, head of research on ETFs and mutual funds. at CFRA.
Bond ETFs collected $ 207 billion in flows in 2021, roughly the same amount as in 2020. Given the inflationary pressures in the second half of the year and a Fed that turned very hawkish at the end of the year, flows maintaining a variety of pressures in a space is not something to be stepped up.
Despite the losses in bond investments, actively managed fixed income ETFs were able to weather the recession more successfully than large index bond funds. Many of the major fixed income ETFs were able to maintain losses below 1% throughout the year, while the major passive fixed income ETFs such as the IShares Core Aggregate Bond ETF (AGG) lost 1.93% in 2021, others reflecting losses above 2%.
Actively managed bond ETFs also ended the year with 11% of total assets in the bond ETF space, but generated 14% of inflows. This reflects the fact that investors are increasingly turning to active management in times of inflation and with looming interest rate hikes at the forefront of concerns for bond investors.
“We believe investors will adopt more active ETFs in 2022 ahead of a more hawkish Federal Reserve,” Rosenbluth predicted in an investor communication.
Active management firm T. Rowe Price offers several ETF options in the bond space, including the T. Rowe Price Total Return ETF (TOTR), the T. Rowe Price QM US Bond ETF (TAGG), and the T. Rowe Price Ultra Short Term Bond ETF (TBUX).
The company brings a wealth of experience and research to its products, with portfolio managers averaging over 20 years of investment each, as well as more than 400 investment professionals dedicated to researching companies within ETFs.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.