Evolving Roles for Fixed Income ETFs Research Report

Our new fixed income investment research reveals four trends that highlight the ever more important role exchange traded funds (ETFs) play in an evolving fixed income landscape, helping investors to build fixed income portfolios, meet liquidity needs, support the shift to in-house management, and implement ESG objectives.


ETFs’ Role in Portfolio Construction


Investors are using ETFs to expand into non-core sectors. AUM has more than doubled in the past five years, and the increased number of funds means investors have more options for precise exposures.

Investors Are Turning to ETFs to Build Core and Satellite Allocations

Source: State Street Global Advisors, May 2022. Chart shows percentage for somewhat/very likely to use ETFs. n=700.


Meeting Liquidity Needs with ETFs


Increasing portfolio liquidity is a top concern across survey respondents, and they’re deploying a range of strategies to manage liquidity risks — including the use of fixed income ETFs. 

ETFs Play a Critical Role in Maintaining Liquidity Profiles

Source: State Street Global Advisors, May 2022. Note: Respondents were allowed to select all that apply. n=473.


Using ETFs for In-House Management


Survey respondents, particularly asset owners, are building in-house investment teams to improve efficiencies in fixed income portfolios. Lower-cost ETFs can help, given the pressure investors face to make better use of fee budgets.

Active and Index ETFs Rank High For Asset Owners as Internal Fixed Income Management Tools

Source: State Street Global Advisors, May 2022. Chart shows percentage rating as high importance. Note: Respondents selected the level of importance for each asset. n=211.


Implementing ESG Objectives


Investors say ensuring fixed income portfolios take ESG issues into account is a top priority. And asset managers, especially, see ETFs as highly important tools for pursuing ESG objectives.

Investors See Index ETFs As Important ESG Integration Tools

Source: State Street Global Advisors, May 2022. Chart shows percentage rating index ESG ETFs as high importance. n=700.


Dig Deeper


For additional institutional insights into our findings and a comprehensive review of what they could mean for fixed income portfolios everywhere, dig more into our analysis.


About the Survey


State Street conducted a survey of 700 institutional investors in 2022. Global survey respondents came from pension funds, wealth managers, asset managers, endowments, foundations and sovereign wealth funds. Their responses reveal how exchange traded funds (ETFs) are an increasingly important tool in the evolving fixed income landscape.


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