The growth of exchange-traded funds has helped transform equity markets over the past decade. Now they’re eyeing mortgages.
BlackRock Inc., the world’s largest provider of ETFs, sees fixed income as a growth driver for the indexed products, with corners of the market including mortgage-backed securities ripe for transformation, said Mark Wiedman, the firm’s global head of iShares.
“The ETF is simplifying,” he said, speaking at BlackRock’s investor day on Tuesday in New York. In the future, more packagers of mortgage securities could opt for ETFs instead of mortgage-backed securities, he offered as an example. “We see that growth everywhere in the world,” he said of the trend in fixed-income.
BlackRock’s iShares MBS ETF, ticker MBB, has US$11.8 billion in assets and is the largest of its kind in the U.S.
The firm champions the idea that transforming debt markets will plow additional assets into ETFs. Global ETF assets will swell to US$12 trillion by the end of 2023, BlackRock estimated in a report last week, saying that changes in the bond market will play a key role in that growth.
The asset manager also is partnering with Cboe Global Markets Inc. and IHS Markit Ltd. to offer futures tied to U.S. corporate bond indexes, which are expected to debut in a matter of months. The products will give institutional investors easily tradable securities to make forward bets in the debt markets and protect their exposure to U.S. credit risk.
“Fixed-income indexing is crying out to be so much larger,” Wiedman said.
Bloomberg LP, the parent company of Bloomberg News, owns the Bloomberg Barclays Indices, a suite of fixed-income indexes.