Winners rationale

The COVID-19 pandemic and the resulting volatility in global financial markets, highlighted the need to rethink fixed income portfolio construction, particularly the role ETFs can play in fixed income allocations.

An outstanding candidate on those characteristics was iShares bond ETFs, which not only offered index exposures, but provided competitive returns that tracked their indices closely over the long term. Measuring across the largest iShares bond ETFs by AUM, Asian Private Banker was able to see long term median peer group performance across active and index funds, ranging from the strategic safe haven exposures (such as government bond ETFs), equity diversifiers (such as bond aggregate exposures), on to the more tactically used income exposures (such as emerging market debt and high yield) – all delivering competitive cost adjusted performance compared to the wider mutual funds cohort.

During heightened market volatility, iShares bond ETFs not only traded, but traded at elevated volumes, acting as a price discovery mechanism to the underlying bonds. This distinction has been unprecedented in fixed-income markets, according to the Asian Private Banker’s analysis.

To highlight an example, trading in US bond ETFs surged to US$1.3 trillion in 1Q2020 — half of the US$2.6 trillion for all of 2019. iShares UCITS bond ETFs traded an average of US$17.5 billion (through late February-March 2020), more than twice the 2019 weekly average of US$7.8 billion. BlackRock saw over 78 institutional first-time bond ETF buyers globally in March 2020 – and 40% of those were from Asia.

If that wasn’t enough, iShares led product innovation. Its China bond ETF provided a one-stop access to China rates exposure, favoured by private wealth, family offices, as well as official institutions, with multi-asset managers introducing China onshore bonds into their strategic asset allocation. As a result, the largest iShares China bond ETF raised a market-beating US$3 billion plus in investments over the span of the first 10 months of 2020.

iShares combined best-in-class exposure to fixed-income investment strategies on a low-cost basis while delivering superior performance. In 2020, it distinguished itself from peers by delivering performance, risk management, and client services. In particular, its withstanding of an unprecedented event in global financial markets earns iShares the Asian Private Banker’s Best Fund Provider – Bond ETF.