Pension funds increase use of fixed income ETFs

Towers Watson senior investment consultant Christopher Sutton says a lot of UK pension funds have increased their allocation to corporate bonds over the last year. However, he explains liquidity only materialises at the new issue of a bond in many cases. He says: "What we're increasingly seeing is rather than being hostage to those liquidity points, pension funds are using the ETF to buy the corporate bonds when they want to. They then move out of the ETF into underlying bonds as new issuance brings to market the type of bonds they require, in terms of the duration and credit rating." ...