European investment professionals are seeking more options in the fixed income ETF market with one in 10 citing the current offering as ‘poor’.
Research carried out by ETF provider Tabular Investment Management, speaking to 100 professional investors across Italy, France, Germany, the UK and Switzerland, who collectively manage $142bn in assets, found there is room for improvement in passive bond products, despite swathes of ESG funds being launched every month.
One in 10 respondents said the current ESG offering in the fixed income ETF market was ‘poor’ and a further 29% described it as ‘average’. Only 7% said the product range available was ‘excellent’. Some 40% said they want a greater choice of fixed income ESG ETFs.
Investors called more innovation with 60% saying they would like to see more innovative products available and 54% want better coverage across different fixed income asset classes.
| Fixed income asset class | Percentage of European professional investors who would like to see new or better ESG ETFs for this asset class |
| Corporate credit | 62% |
| High yield credit | 39% |
| Emerging market credit | 39% |
| Carbon market | 34% |
| Sovereign credit | 32% |
| Climate-aligned strategies | 27% |
| Thematic | 4% |
Specifically, in relation to which fixed income asset classes could see new or better ESG ETFs, 62% pointed to corporate credit, followed by 39% who highlighted high yield credit and 39% who cited emerging market exposure.
Michael John Lytle, CEO of Tabula, said: “Our research shows there is much room for improvement in the range of ESG fixed income ETFs.
“[We are] exploring how to address investors’ needs and tackle the current gaps in fixed income solutions. Every time we propose a new fund to clients, they share with us five other challenges facing their fixed income portfolios. It is a very dynamic environment, ripe with needs and opportunities.”
