Bond exchange-traded funds have been racking up investment inflows over the last few years and continue to gather steam, thanks in large part to institutional investors, according to BlackRock. The asset management giant forecasted bond ETF assets to more than triple, to $6 trillion worldwide, by the end of the decade.

According to a BlackRock report, it took 17 years for bond ETF assets to reach $1 trillion in 2019 and then just another five years for that figure to climb to $1.7 trillion as of the end of September 2024.

“The global bond ETF industry is growing faster than expected,” the report stated. “A key driver of this growth has been the adoption of fixed-income ETFs by institutional investors.”

According to BlackRock, the 10 largest asset managers—and nine of the 10 largest insurance companies—along with some central banks, are using the investment vehicle.

The report also stated that growing use of actively managed ETFs has contributed to the sharp rise in bond ETF assets. The report found that while bond ETF growth has traditionally been fueled by index-based investments, that source has expanded to now include actively managed ETFs, which provide access to sub-asset classes that are more difficult to index.

“Historically, active strategies have only been available in mutual funds or separate accounts,” the report stated. “Today, however, the expanding landscape of active fixed income ETFs enables institutional investors to access these same strategies.”

The report cited a recent PricewaterhouseCoopers survey of institutional investors that found that nearly 25% of respondents are considering investing in active ETFs over the next year or two.

“Increasingly, active ETFs are becoming critical components in fixed-income portfolios alongside index and enhanced index strategies,” the report stated. “In fact, over the past three years, U.S. actively managed bond ETFs have outpaced the growth of index ETFs at an annualized 26% rate.”

According to the BlackRock report, actively managed strategies currently account for 14% of U.S. fixed-income ETF assets under management and 8% of total U.S. ETF assets.

“The growth rate of active ETF assets is expected to outpace total ETF growth in coming years, in part driven by the evolving demands from the institutional investor base,” the report stated.

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Tags: actively managed ETFs. exchange traded funds, BlackRock