In an article for ETFTrends, Todd Rosenbluth discussed how US insurance companies are aggressively investing in fixed income ETFs. Last year, the industry invested a total of $37 billion in ETFs. This is a small portion of the overall ETF market and the $7.9 trillion that is cumulatively managed by US insurance companies.
However, insurance companies are some of the largest holders of fixed income ETFs especially for corporate bonds according to a report from S&P Dow Jones Indices. S&P Dow Jones believes that insurers are gravitating to these products because of increased liquidity and higher yields. Additionally, these ETFs functioned well over the last couple of years despite periods of considerable market stress.
In terms of ownership, insurance companies own 14% of the iShares iBoxx $ Investment Grade Corporate Bond ETF at year-end 2022. The average duration is 8 years with a split of A- and BBB-rated bonds.
2 more popular bond ETFs are the iShares 1-5 Year Investment Grade Corporate Bond ETF andthe iShares 10+ Year Investment Grade Corporate Bond ETF (IGLB). Both invest in similar products but with different durations. Each has 11% and 7% ownership by the insurance industry, respectively.
Finsum: Fixed income ETFs are becoming increasingly accepted by institutional investors. Research from S&P dow Jones shows that insurance companies are some of the largest holders.