Will there be more bond-flavored ETF offerings in the future? The Wall Street Journal
today reports that obstacles notwithstanding, more fixed-income ETFs will manage to find their way to the market. But a closer look at the article
gives one pause. Either Journal is seeing things that are hidden from everyone else’s sight, or it is being far more optimistic than it should be about future launches.
The article subhead boldly declares “Bond Market Options Face a Number of Hurdles But Demand Seems Strong.” The body of the piece quotes industry insiders, including an executive from the American Stock Exchange and one from Barclays Global Investors to support it arguments.
According to the article, while the road towards the creation of bond ETFs is paved with challenges, “[m]ost people in the industry nevertheless believe more fixed-income ETFs are on the way.” One group that may be interested in fixed-income ETFs, according to the article, is institutional investors.
However the perspective of buyers is conspicuously absent from the article (not one institutional buyer was quoted directly or indirectly). Still, that is the very group that could substantiate the story’s main claim.
The observation voiced by Scott Ebner, head of new-product development at the American Stock Exchange, is telling. In explaining why there are only six bond ETFs in existence, Ebner noted that ETF sponsors “are always more cautious about their approach to products, especially in areas that are different, when they’re not first to market.”
One couldn’t help but think that if there were really a strong clamor for such products, companies would’ve been tripping over themselves by now as they attempt to break BGI’s lock on the market.
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