New issuer BondBloxx aims to disrupt fixed income ETFs

Oct 8th, 2021 | By | Category: Fixed Income

BondBloxx Investment Management, a newly minted specialist fixed income ETF issuer, is gearing up for its first fund launch.

Leland Clemons, co-Founder of BondBloxx

Leland Clemons, co-founder of BondBloxx.

The firm’s originators include ETF veterans from BlackRock, JP Morgan, State Street, Northern Trust, and HSBC that have been at the forefront of developing some of the largest ETFs available today.

The firm plans to harness that experience, alongside innovations in bond market pricing and trading technology, to provide ETFs offering more precise fixed income exposures in a bid to help investors better diversify and manage risks related to credit quality, maturity, and industry sectors.

Leland Clemons, one of the firm’s co-founders, said: “The bond market is evolving with innovations in price transparency and electronic trading that have set the table for a step-change in the evolution of fixed income ETFs. The BondBloxx team understands the power and potential of ETFs to improve investment outcomes with greater transparency, increased liquidity, and lower costs.”

Clemons is a former Head of Fixed Income and Derivatives at Tradeweb Europe and Global Head of Markets and Investment Strategy at BlackRock’s iShares

Current filings with the SEC indicate that BondBloxx’s initial product offering will encompass a suite of high-yield corporate bond ETFs targeting seven specific industry sectors within the ICE BofA US High Yield Index, namely communication services, consumer discretionary, consumer staples, energy, financial, healthcare, and industrials. While sector-specific strategies are common amongst equity ETFs, the approach has yet to be properly explored within the fixed income universe.

BondBloxx will be hoping to carve out a niche in the US’s rapidly growing fixed income ETF market which has expanded seven-fold over the last ten years and is expected to reach $2 trillion by 2024. Yet, despite the US bond market being double the size of its equities counterpart, there are currently only around 400 US bond ETFs compared to over 1,700 on US equities, highlighting how transparency and accessibility issues have hampered product development in this area.

BondBloxx believes this is ripe for change.

Joanna Gallegos, another of the firm’s co-founders and formerly a Head of Global ETF Strategy at JP Morgan and Head of ETF Product Management at BlackRock’s iShares, said: “Delivering fixed income ETFs can be challenging given the differences in market structure and price transparency. But bond markets are evolving, and this team is singularly focused on creating new products designed to deliver the benefits of ETFs to fixed income investors. Our objective is to put fixed income ETFs on a level footing with equities by empowering investors with products that enable more precise portfolio construction in key bond market asset classes.”

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