Despite the post-2022 rise in interest rates, fixed income exchange-traded funds (ETFs) are seeing a surge in demand—with both index-based and active funds playing a role.
That’s the key message of the latest Index Ideas podcast, featuring Jack Fischer, US Fixed Income Product Lead at FTSE Russell.
In Index Ideas, we explore the concepts and the design choices behind the most popular index names, covering equities, fixed income and other asset classes.
“Fixed income ETFs are just a force to be reckoned with,” Fischer says in the podcast.
“As at end-September 2025, the last monthly outflow for fixed income ETFs was back in February of 2023,” he goes on.
“Even during 2022, which was the worst year on record for taxable fixed income performance and second worst for tax-exempt performance, ETFs found a way to survive. They're a wrapper that provides a broad range of solutions to the market, and they've been adopted at a record level since the start of this year.”
The rising demand from global investors for fixed income ETFs covers both passive (index-based) and active funds, says Fischer. The current asset split between passive and active ETFs is around 2:1 worldwide, with healthy recent product development on the active side, particularly in credit ETFs.
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Assets under management in US-domiciled fixed income ETFs ($bn)
Assets under management in non-US-domiciled fixed income ETFs ($bn)
However, demand for index-based fixed income exposure via ETFs remains strong, says Fischer, particularly amongst US investors seeking to diversify outside their domestic market or seeking to hedge against a falling domestic currency: the US dollar declined 13.5% against the euro in the first nine months of 2025.
“Part of the demand for international fixed income exposure [among US investors] is dollar weakness,” Fischer says.
“But a lot of clients are still hedging back to the US dollar, so taking out that currency risk. I think it has more to do with the overall divergence in global policy. Different markets are attacking growth scares and inflationary pressures in a different way.”
“You pair that with how tight fixed income spreads are in the US market. Portfolio managers and investors are just looking for opportunities. And they're using the global stage to source those opportunities.”
One FTSE Russell index family that is seeing a rise in demand from investors is the FTSE World Government Bond index (FTSE WGBI), which celebrates its fortieth anniversary in January 2026. The FTSE WGBI measures the performance of fixed-rate, local currency, investment-grade sovereign bonds from over 20 countries, denominated in a variety of currencies.
“The World Government Bond Index is certainly seeing a record level of attention,” Fischer says.
“I've never seen this much focus on international allocation before. And the WGBI, which is our flagship government bond index, is front and centre, whether it's asset owners or whether it's asset managers. They're looking at ways to gain access to international sovereign debt in a modern way.”
Although the plain vanilla version of the WGBI is the most widely recognised amongst fixed income investors, other indices within the WGBI family are seeing increased interest, says Fischer.
“One index that I find interesting is the debt capacity version of the World Government bond index, which overweights or underweights markets based on a country's ability to pay back its own debt. That index underweights the US, Japan and China relative to the base index,” Fischer explains.
To listen to the Index Ideas podcast with Jack Fischer, click here.
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