Fixed income ETF marketplace set for change says BondBloxx’s Morris

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Ben Morris, BondBloxx

In his new role with BondBloxx Investment Management, Benjamin Morris talks to Philippa Aylmer about the growth of targeted fixed income ETFs.

Electronification and increased data transparency are radically changing the fixed income ETF marketplace, says Benjamin Morris who has recently joined BondBloxx Investment Management, the California-based start-up. 

“Not only are we seeing more fixed income ETF launches, but we are also seeing demand from investors for more targeted fixed income products. And with greater transparency around individual securities comes greater transparency around the correlation of securities,” says Morris. “This means that more accurate fixed income strategies can be developed that will target areas of focus and correlation. 

“Up to now, there has not been much focus on specialisation within fixed income, unlike in equities. Most fixed income products have just been about looking at a broad sector, aggregate or high yield for example. However now, rather than thinking at the macro level, we are thinking more granularly. As a result, we expect to see the growth of more targeted fixed income ETF products.”

BondBloxx, which was founded by Leland Clemons, Joanna Gallegos, Elya Schwartzman, Mark Miller, Brian O’Donnell and Tony Kelly, has recently launched a suite of ETFs targeting specific sectors of the US high yield bond asset class. These include Energy; Industrials; Financial and REIT; Telecom, Media & Technology; Healthcare; Consumer Cyclicals; and Consumer Non-cyclicals. 

More recently, BondBloxx has filed for four further products – although not effective yet. In January 2022 BondBloxx filed for BB-rated, B-rated and CCC-rated USD High Yield Corporate Bond ETFs and in early April it also filed for the BondBloxx JP Morgan USD Emerging Markets 1-10 Year Bond ETF. 

Morris who was previously Bloomberg’s Global Head of Product and Business Management for their primary market solution for ETFs and has known the team at BondBloxx for many years, emphasises that the specialisation of fixed income ETFs should not be compared to thematic equity ETFs. “We are not trying to apply equity metrics to fixed income. We are building fixed income ETFs to resonate with fixed income markets.” He concedes that there are similarities in terms of bucketing and “we might use the word factors,” he says, “but the factors that we think about are specific to fixed income. And they predate much of the ETF market. For example, the rating process is a true fixed income metric rather than created as part of the indexification of the market.”

While Morris’ role is to focus on the portfolio management and capital markets side of the business, he says that one of the really exciting parts of being in a start-up is the ability to see across the business. “It is a big factor of why I wanted to join,” he adds. 

“I really believe that the business and product strategy that the team has put together is going to fill a need in the marketplace. The timing is right given the electronification of the markets, the prevalence of portfolio trading and the growth of fixed income ETFs.” 

BondBloxx is looking to grow aggressively over the next few years - the team is developing new ideas and plans to launch more products this year and many clients are proposing new ideas to them too. “There is a ton of room for innovation in this market and I am really excited about the vision and the focus of this strong and hyperfocused team,” adds Morris.

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