“While February’s ETF data showed investors re-entered the market for U.S. equity funds, it didn’t slow the flow of assets to an expanding lineup of fixed-income ETFs. Have investors rubbed the wrong way by stocks simply expanded their horizons? Is fixed income a blister, or the next market bubble,” Don Dion Reports From The Street.
Dion goes on to say, “After getting burned by the stock-market downturn, investors turned to fixed-income ETFs as an alternative. According to data from the National Stock Exchange, some $4.1 billion poured into long fixed-income ETFs in 2008, growing to $6.1 billion in 2009. As of Dec. 31, the iShares Barclays TIPs ETF (TIP) was the No. 8 ETF in the U.S., with $18.5 billion in assets. ETF issuers responded eagerly, offering an assortment of new fixed-income flavors to investors who must often feel like kids at a really big ice cream parlor. It’s hard to believe we once had a choice of only chocolate or vanilla Treasuries or corporate?”
“In 2010 alone, investors have been introduced to everything from the PIMCO Short Term Municipal Bond Strategy Fund (SMMU) to the iShares 2012 S&P AMT-Free Municipal Series ETF (MUAA). The greatest threat to ETF investors isn’t the bursting of a fixed-income bubble, but rather the absence of market liquidity. Every time assets flood into a certain type of ETF, be it emerging markets, commodity or fixed income, issuers run to divert some of that flow into their own buckets. The result is classic oversupply and dilution,” Dion Reports.
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