The hunt for yield is on in full force.
As investors clamor for income in an era of historically low interest rates, one part of the ETF market is reaping the benefits: bond funds.
“More money has gone into bond funds than any other asset class in ETFs,” Harry Whitton, head of ETF sales and trading at Old Mission, told CNBC’s “ETF Edge” on Monday. “We have seen more equity volume probably over the last month or so, but if you go back all the way, back to when the pandemic started, bonds have really been the king.”
Since then, bond funds have accrued $85 billion in inflows compared with $20 billion for equity-based funds, said Whitton, whose firm provides liquidity for some of the hardest-to-price ETFs on the market.
The iShares Core U.S. Aggregate Bond ETF (AGG), one of the most popular bond ETFs on the market, hit a new all-time high on Monday. That and the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) were trading below their recent records on Wednesday.
“The government actually has stopped buying ETFs — at least they said they have,” Whitton said. “But the AGG is closing in on $80 billion of assets under management. It’s amazing. … It’s higher than before the pandemic, and it’s at a record high. People are yield-searching.”
Luckily for both investors and the industry, the size of the pie is growing, Whitton said. Last year, the top 10 ETF issuers had at least $1 billion in net inflows, he noted. This year, Invesco, which holds 2020’s No. 10 spot, has already seen upward of $3.5 billion.
“Regardless of the product, you’re seeing just record volumes all across the place,” Whitton said. “The growth of ETFs and the actual trading volume in ETFs is just huge.”
Disclosure: Invesco is the sponsor of CNBC’s “ETF Edge.”