Bond ETFs Survived Their First Big Crisis
Some funds bore the brunt of March’s debt market selloff, but central bank support helped restore the balance.
Sam Huszczo had long been a skeptic. Exchange-traded funds, already wildly popular among equity investors, were emerging as a cheaper, easier way to build a fixed-income portfolio than investing in a mutual fund. But after a decade-long bull market, no one could be sure how the new products would perform in a downturn. Would they exacerbate turmoil in their underlying markets?
Finally, near the end of 2018, the founder of SGH Wealth Management in Southfield, Mich., decided to give them a try, investing about 27% of the firm’s assets in the funds. Throughout 2019, things seemed to be working well, Huszczo says. Then the coronavirus became a global pandemic, plunging stock and bond markets into a downturn.