Investments into fixed interest exchange-traded funds (ETFs) hit a new monthly record of $9 billion in January this year, according to BlackRock Investment Institute research.
The previous monthly record was $6.7 billion, set in January 2009.
Global asset flows for exchange traded products (ETPs) have now reached $34.1 billion in net inflows, a 144 per cent increase on the previous record set in January 2011, the ETP Landscape report said.
iShares director Tom Keenan said the response of Australian investors toward fixed income ETFs will be comparable to the fast-growing take up by overseas investors, once products come to market.
"They are going to prove very popular with both retail investors and financial advisers [as] fixed income is under-utilised in the Australian marketplace largely due to being difficult to access than other markets," he said.
"I think you'll see broad-based fixed income benchmark exposures first and then as time goes on, the various components that make up that broad-based benchmark will be listed as well."
The Australian Securities Exchange's Operating Rules approval for fixed income ETFs to be traded in Australia will mark an unprecedented access to the buying and selling of a diversified Australian bond portfolio, Keenan said.
"This is a significant event. There is a screaming need of truly defensive assets in client portfolios," he said.
"One thing the global financial crisis taught us was that you need real diversification."
Keenan said advisers can prepare for fixed income ETFs by assessing the provider, the benchmark and the underlying liquidity of the ETF.
State Street Global Advisors (SSgA) head of SPDR ETFs for Asia Pacific Frank Henze said during 2012, investors will be likely to seek out fixed income ETFs with higher yields such as high yield bonds, convertible bonds and preferred stocks.
"With smaller investors struggling to gain diversified access to the fixed income market in the past and with fixed income yields in Australia looking very attractive compared to other international jurisdictions, the timing is right for the introduction of these products locally," he said.
Both SSgA and iShares intend to launch fixed income ETF products to the Australian market this year.
