Original, independent, thought leadership
CoW20221024 (002)

Sustainable fixed income ETFs gain assets

0:00 / 0:00

Share This Article:

The Bottom Line:  Facing strong headwinds, sustainable fixed income ETFs experienced net inflows on a year-to-date basis to September 30th while equity funds sustained outflows.

0:00 / 0:00

Sustainable fixed income ETFs:  Top 5 ETFs based on assets gains and bottom 5 ETFs by assets declines year-to-date to September 30, 2022Notes of Explanation:  *Index tracking fund.  Sources:  Morningstar Direct, Sustainable Research and Analysis LLC

Observations:

  • Assets attributable to sustainable ETFs, a total of 224 funds with $90.6 billion in net assets as of September 30 according to Morningstar, experienced a decline of $23.7 billion since the start of the year, or a 20.7% dip. Equities and bonds suffered steep total return declines during the first nine months of the year.  All ETFs combined dropped 25.4%, equity funds gave up 27.2% while bond funds posted an average decline of 16.2%–a very unusual two-punch consequence attributable to high inflation.  Drops due to market depreciation plus outflows were offset by an estimate $61.4 billion in cash inflows to limit the overall drop to $23.7 billion. That said, sustainable bond ETFs experienced net gains in assets since the start of the year while equity funds asset under management declined.  
  •  Equity ETFs account for $90.4 billion in assets invested across 183 equity funds. This segment saw its assets decline by $24.2 billion since the start of the year, experiencing a combination of market depreciation and outflows estimated to be in the amount of $28.1 billion, offset by $3.9 billion in inflows.    
  • At the same time, fixed income funds gained $481.4 million, or 7%, during the same interval.   Consisting of 34 actively as well as passively managed ETFs as of September 30th with $7.3 billion in net assets, fixed income ETFs experienced inflows in the amount of $1.5 billion, offsetting a combination of about $1.1 billion representing market depreciation plus estimated outflows.  The gains were largely observed during the first five months or the year or so.
  • Fixed income funds, which account for almost 16% of the sustainable fixed income ETF segment, realized 60.1% of the net cash flows versus passively managed fixed income funds.   Actively managed fixed income, on average, outperformed passively managed funds in each of the three quarters since the start of the year.  But this performance differential is largely a function of the composition of the two sub-segments with passively managed funds having more exposure to funds with high yield and emerging markets mandates. 
  • The top 5 ETFs track either the broad fixed income market with some variations or limit investments to corporate bonds only. Otherwise, the three index tracking funds employ ESG screening and exclusions to isolate eligible securities, however, Inspire Corporate Bond ETF (IBD) is guided by adherence to a biblical theme. As for the top two actively managed funds, in one case, IQ MacKay ESG Core Plus Bond ETF (ESGB) also employs an issuer engagement approach while in the second case, OneAscent Core Plus Bond ETF (OACP), the sub-adviser also seeks to invest a portion of the fund’s assets in impact-oriented securities that have the potential to achieve social or environmental benefits.
YOU MAY ALSO LIKE
$99.99
PER YEAR

Premium Articles Access Priority Support 1 Fixed Price

Free Trial
30 Day

Access to All Data No Credit Card Required Cancel Any Time

9.99
Monthly

Access to Premium Articles Priority Support Save 25%


Sign up to free newsletters.


By submitting this form, you are consenting to receive marketing emails from: . You can revoke your consent to receive emails at any time by using the SafeUnsubscribe® link, found at the bottom of every email. Emails are serviced by Constant Contact

Research

Research and analysis to keep sustainable investors up to-date on a broad range of topics that include trends and developments in sustainable investing and sustainable finance, regulatory updates, performance results and considerations, investing through index funds and actively managed portfolios, asset allocation updates, expenses, ESG ratings and data, company and product news, green, social and sustainable bonds, green bond funds as well as reporting and disclosure practices, to name just a few.

A continuously updated Funds Directory is also available to investors.  This is intended to become a comprehensive listing of sustainable mutual funds, ETFs and other investment products along with a description of their sustainable investing approaches as set out in fund prospectuses and related regulatory filings.

Getting started

Many questions have surfaced in recent years regarding sustainable and ESG investing.  Here, investors and financial intermediaries will find materials that describe the various approaches to sustainable investing and their implementation.  While sustainable investing approaches vary and they have thus far defied universally accepted definitions, many practitioners agree that they fall into the following broad categories:  Values-based investing, investing via exclusions, impact investing, thematic investments and ESG integration.  In conjunction with each of these approaches, investors may also adopt various issuer engagement procedures and proxy voting practices.  That said, sustainable investing approaches will continue to evolve.

In addition to periodic updates regarding sustainable investing and how this form of investing is evolving, investors and financial intermediaries interested in implementing a sustainable investing approach will also find source materials that cover basic investing themes as well as asset allocation tactics.

Inesting ideas

Thoughts and ideas targeting sustainable investing strategies executed through various registered and non-registered sustainable investment funds and products such as mutual funds, Exchange Traded Funds (ETFs), Exchange Traded Notes (ETNs), closed-end funds, Real Estate Investment Trusts (REITs) and Unit Investment Trusts (UITs). Coverage extends to investment management firms as well as fund groups. 

Independent source for sustainable investment management company research, analysis, opinions and sustainable fund disclosure assessments