Nonetheless, newcomer BondBloxx sees a gap in an industry dominated by large, broad-brush funds. It plans to use constituents of the ICE BofA U.S. junk bond index, which tracks about 2,100 bonds, to fill its ETFs.
The U.S. market for fixed-income ETFs has grown to almost 500 funds managing more than $1.2 trillion, according to data compiled by Bloomberg. Around 150 ETFs specifically target corporate bonds, with the largest covering huge chunks of the market, like iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD). Most others focus on specific maturities or structures, like the Vanguard Intermediate-Term Corporate Bond ETF (VCIT).
The growth of the industry has accelerated after the Federal Reserve backstopped the market during the worst of the pandemic selloff, while the need to work from home also increased the electronification of the bond market. As a result, portfolio trading -- a tech-powered method of trading many bonds in one go, usually using ETFs -- is booming.
With technology taking over more old-school methods of trading bonds, BondBloxx sees more opportunities ahead.
Most of the firm’s founders have at some point worked for BlackRock, the world’s largest ETF issuer. They include Joanna Gallegos, most recently head of global ETF strategy at JPMorgan Asset Management, Elya Schwartzman, Mark Miller, former head of institutional sales for the Americas at HSBC, and Brian O’Donnell, previously the head of business strategy at Northern Trust Asset Management.
“You’ve got a lot more issuers putting their hands up and driving innovation,” said Gallegos. “That focus is going to drive a lot of choice for clients.”
This article was provided by Bloomberg News.