ETFs have not seen the liquidity problems in Europe that have hit other types of investments, such as some property vehicles post-Brexit, Adam Laird tells Professional Adviser's sister title Investment Week
Many investors have questioned liquidity levels within the bond universe as well as fixed income exchange-traded funds (ETFs) recently.
As many bonds do not trade often, there is a fear that if investors run for the door, markets could freeze which could mean bonds funds are suspended as well as ETFs.
However, Adam Laird, head of ETF strategy for Northern Europe at Lyxor ETF argues ETFs have not seen the liquidity problems in Europe that have hit other types of investments, such as some property vehicles in the aftermath of the 2016 Brexit vote.
"ETFs are often more liquid than their underlying investments," says Laird, adding that investors can take steps to protect themselves, by choosing a fixed income ETF provider with a track record.
"At Lyxor, we work with dozens of market makers around Europe to ensure the best results when trading our ETFs."
Laird notes that ETFs have three big advantages for bond investors in that they are low cost, targeted and convenient.
"When yields are still at such low levels, an active manager's fees can really hurt you. Meanwhile, there are very few active gilt funds as bond sectors are often very broad," he says.
"If you need to manage risk, or pinpoint an opportunity, you want the ability to select your fund by country, currency and maturity."
"It can also be hard to work out what an active bond manager is doing, but ETFs track an index - they are transparent, so you always know what you are getting.
"Passive investing and bond ETFs are a more reliable option."
Click here for independent analysis of Lyxor's inflation-hedging fixed income ETF range and how they could fit into your portfolio in Financial Library
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