Despite the volatility in the financial market, exchange-traded funds or ETFs have seen consistent growth over the past three years. As per to one estimate, global ETF assets grew 5 percent over 2010 to reach $1.06 trillion at the end of 2011. Fixed income currently accounts for about 18% of the global ETF market, up from 7% in 2007 at the onset of the financial crisis.
The fastest growing asset class in ETF is the bond or fixed income ETF, which has grown to $309 billion with a 10 year compound annual growth rate (CAGR) of 57%. At the current growth rate, global bond assets could be worth $1 trillion within five years.
ETFs have been in favor with retail investors as well as institutional investors largely due to their ease of use and transparency in trading. In the world's biggest ETF market, US, investors are reported to have poured in $180 billion last year in bond ETF assets. That translates to a growth of 38 percent y-o-y versus a 7 percent y-o-y growth in domestic equity ETF assets.