Exchange-traded funds have been part of markets for decades, initially perhaps associated with thematic investing, and then with enabling investors to access a broad index of equities.
But the role of ETFs in contributing to the building of a fixed income allocation is a relatively new phenomenon.
A rationale for ETFs, which are listed stock exchange instruments in their own right, is that the structure provides liquidity that may not be present in the underlying asset class, but with most parts of the bond universe already liquid, what can the ETF structure contribute?
Iain Stealey, international chief investment officer of global fixed income at JPMorgan Asset Management, says: “One of the biggest benefits clients tell us about is how much easier it’s become to access fixed income through ETFs. The ETF structure itself is appealing for a few simple reasons: it tends to cost less, it’s easy to buy and sell, and you can see the price change throughout the trading day rather than just once.
“With more and more fixed income ETFs available now, covering all kinds of sectors and regions, everyday investors can put together a well-rounded bond portfolio much more easily than before.
“We’ve also spent the last few years building out our own actively managed fixed income ETFs, using the same investment approach that’s long powered our mutual funds. That means ETF investors can now tap into the same time-tested strategies, just in a different, more flexible wrapper.”
The case for active management in bond markets
Natalia Wolfstetter, senior principal – manager research at Morningstar, says fixed income ETFs are becoming consistently more relevant within the broader ETF universe.
“Fixed income has become one of the most important areas of innovation in active ETFs. Many providers see the bond market as a natural fit for active management, and actively managed bond ETFs have been gaining rapid traction,” she says.
“Bond strategies accounted for 27 per cent of the active ETF flows in the first half of 2026, up from 10 per cent in 2024. Many of the launches this year have been active bond ETFs covering areas such as corporate credit, government bonds, AT1s, CLOs [collateralised loan obligations] and floating-rate notes.
“So, this is less about creating entirely new strategies and more about making a range of active fixed income capabilities available within the ETF wrapper. The focus is on security selection within narrowly defined segments, rather than large directional bets on duration or credit quality,” she adds.