BondBloxx Co-Founder Discusses Institutional Investors’ Need For Accurate Fixed Income Exposure

A team of financial market veterans announced in October the launch of BondBloxx Investment Management, the first ETF issuer solely focused on the needs of bond investors. BondBloxx co-founder Joanna Gallegos spoke to ETF Trends about what BondBloxx is doing, how institutional investors are using ETFs differently than retail investors, and the growth in ETF usage among institutions.

Prior to co-founding BondBloxx, Gallegos was head of global ETF strategy at JPMorgan Asset Management and head of ETF product management at BlackRock’s iShares.

ETF Trends: Tell me about BondBloxx and what you do.

Joanna Gallegos: BondBloxx is unique in that it is the first ETF issuer to focus 100% on fixed income securities. Our goal is to create precise exposures for institutional investors who want to execute specific investment views and have additional tools to manage risk.

BondBloxx was launched in October 2021 by Leland Clemons [the former head of fixed income and derivatives, Tradeweb Europe; global head of markets and investment strategy at BlackRock’s iShares]. I worked closely with Leland during our years at iShares and was really excited about the team he assembled – all extremely innovative and talented industry professionals who had a background in creating of the first fixed income ETFs. [The team includes former executives from BlackRock, State Street Global Advisors, and JPMorgan.]

Since October, we have entered into force with seven high yield sector funds and have been blown away by the interest we’ve garnered from investors as we prepare to launch.

ETF Trends: What made you decide to target institutional investors?

Joanna Gallegos: There is a deep gap between the size of the bond market and the sophistication of the tools available, such as ETFs. Institutions are looking for products that give them precise exposure, but they’ve really been limited in what they can do since these types of tools are underrepresented in the ETF landscape. Most fixed income products on the market are broad-based.

And if you combine that with recent innovations in the fixed income market, including data and technology, we believe this opens up a lot of opportunities to launch highly targeted fixed income products with the precise tools that marketers are looking for. institutional investors.

ETF Trends: How does institutional use of ETFs differ from retail use?

Joanna Gallegos: The amazing thing about ETFs is that everyone can benefit from their advantages – from transparency to tax efficiency and the ability to provide low-cost liquidity. And all of these benefits are universal for everyone.

The difference between institutional investors and individual investors lies in their specificity of use. An institutional investor is probably more looking to implement very specific ideas or specific risk characteristics, and they need tools that don’t currently exist.

For a long time, these investors have been hungry for a wider range of fixed income solutions like portfolio trading, baskets and ETFs. They are stuck and currently using blunt tools (wide exposures) or investing time and resources to source individual bonds.

In addition to using ETFs as an effective portfolio construction tool, institutional investors can take this approach even further, using ETFs as a tool to execute very specific strategies, balance their portfolios and manage risk.

ETF Trends: Do you see an increase in interest in ETFs from institutional investors?

Joanna Gallegos: Yes. The institutional use of bond ETS is accelerating rapidly and this growth is expected to continue in the years to come.

Much of this growth is being driven by new users and new uses – more and more institutional investors are turning to ETFs. We believe that pension funds and insurance companies are increasingly using ETFs for their efficiency in building their portfolios.

We focus on the fixed income buyer, the institutional buyer. We see enormous growth potential here. In addition, there is a lack of product. So it’s really about those two factors coming together – one, there’s more and more interest in ETFs that already exist, and two, we’re seeing more and more ETFs designed to meet the specific investor needs. And we are excited to develop these kinds of products that are really tailored to the needs of investors and the market.

For more news, insights and strategy visit the Institutional Income Strategies Channel.

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