DON’T PUT ALL YOUR AGGS IN ONE BASKET

Investors have flocked back to broad, multi-sector exposures this year, as multi-sector bond ETFs lead industry flows with inflows of over USD 25B year-to-date. This month, we explore how investors can use ETF building blocks to replicate or express views to seek to outperform the Global Agg.

With inflation indicators falling around the world, the time of elevated cash rates may be drawing to an end. Over past rate hiking cycles, cash has lagged bond returns towards the end of each cycle, providing a compelling reason for investors to get ahead of potential rate cuts to step out of cash.

As the flagship measure of global investment grade debt, Global Aggregate Index exposures including ETFs have been the investors’ tool of choice to allocate back into bonds through a one-stop shop, diversified, core fixed income exposure.

Source: BlackRock, Bloomberg, as of 29 March 2024. Reference to Bloomberg US Treasury Bills 1-3 Month Index, Bloomberg Global Aggregate Index. Returns after the 2023 Pause refer to 6m returns after the last rate hike, as of 31 December 2024.