US insurance fixed income ETF holdings expected to increase

Written by Adam Cadle

07/09/2022

US insurers will continue to increase their fixed income ETF holdings, according to Fitch Ratings.

Since New York state introduced new guidelines in December 2021 that allow a fixed income ETF to receive bond-like capital treatment if rated by a nationally recognised statistical rating organisation, Fitch has rated 10 fixed income ETFs from VanEck, Vanguard, and Invesco. If rated, an ETF can receive this specific treatment if it invests only in fixed income securities and cash, is passively managed (i.e. tracks a bond index), and has at least $1bn in AuM, among other criteria. Twenty-four per cent of US fixed income ETFs have AuM over $1bn.

Fitch has estimated that global ETFs, with AuM down 4% in Q2 2022, fared better than the overall ETF market, where AuM was down 12%. European-domiciled fixed income ETF AuM decreased 3% qoq at end-Q2 2022 whilst US-domiciled fixed income ETF AuM was down 2%.

Fixed income ETF strategies that experiences the highest AuM declines included high-yield and emerging markets, down 18% and 10% qoq respectively. The losses were driven by market volatility following the Ukraine conflict and oil price increases.

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