Welcome to the big time, bond ETFs.

Long overlooked as the younger sibling of equity exchange-traded funds, strategies focused on corporate or government debt took in more than $150 billion in the U.S. last year, the most on record and just shy of the sum netted by their stock counterparts. It was the biggest annual leap for bond ETFs since 2014, boosting assets to more than $800 billion, data compiled by Bloomberg Intelligence show.

While the fixed-income world is inherently conservative, the ease and low cost of ETFs is rapidly wooing converts. Worries that stocks have reached their peak, continued uncertainty over the direction of U.S. interest rates and rampant geopolitical risks have bolstered demand -- especially as traders find more and more innovative ways to strategically use these products.

“Investors are seeing the efficiencies that can be found using the ETF vehicle,” said Kevin Flanagan, head of fixed-income strategy at WisdomTree Investments Inc. In finance, “typically you see equity folks take the lead and bond guys follow, and that’s continued.”

Liquidity concerns that have plagued the sector since its inception seem to be fading. While anxiety about a potential mismatch between the liquidity of a fund and its underlying securities hasn’t disappeared, bond ETFs seem to be inspiring more confidence as time goes on and they endure market fluctuations.

Fixed-income funds currently make up about 20% of the $4.4 trillion U.S. ETF market, but a BlackRock Inc. report from June suggests assets could explode to more than $2 trillion globally over the next few years.

In Europe, bond ETFs attracted more money than stock funds for the first time in three years in 2019, data compiled by Bloomberg Intelligence show. Flows into debt ETFs almost doubled in Australia, and Taiwan’s ETF market surged thanks to interest from life insurers.

“There’s a huge wave of wealth retiring, and bonds are traditionally the safe-haven asset that preserves wealth,” said Will McGough, chief investment officer of retirement strategies at Stadion Money Management.

Overbought Stocks

By contrast, even with the S&P 500 Index continuing to beat records, many are wondering how long the bull market in U.S. equities -- now entering its 11th year -- can last.

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