ETF trends to watch in 2010
By John Spenc
This past year was a record for bond ETFs, with investors flocking to a growing number of fixed-income offerings. Through the end of November, taxable-bond ETFs had net inflows of more than $32 billion, the most among the major asset classes, according to investment researcher Morningstar Inc.
Broad-based bond ETFs such as iShares Barclays Aggregate Bond Fund /quotes/comstock/13*!agg/quotes/nls/agg (AGG 102.78, -0.54, -0.52%) and Vanguard Total Bond Market ETF /quotes/comstock/13*!bnd/quotes/nls/bnd (BND 78.36, -0.29, -0.37%) are increasingly popular options for blanket exposure to fixed-income markets.
ETFs are baskets of securities that trade on exchanges like individual stocks, and they are giving traditional mutual funds a run for their money. Investors like the transparency, liquidity, low costs and tax efficiency of ETFs.
"In fixed-income, yields have come down so much that costs are even more important," said Ken Leon, ETF analyst at Standard & Poor's. "The market is developing an appetite for bond ETFs."