May 2025
Fixed Income Monthly Report
Chris Edmonds
President, Fixed Income & Data Services, ICE
The next wave of ETFs: fund hybrids, alternatives and the rise of active management
Market uncertainty has a way of crystalizing what investors value. When equities logged one of their worst two-day streaks in April, we saw investors pile into bond exchange traded funds (ETFs) as a liquid, transparent haven, while many mutual bond funds saw outflows. This popularity reflects a longer-term trend: assets under management for bond ETFs have swelled fivefold since 2010 to $2 trillion today, and BlackRock expects the sector to hit $6 trillion by 2030.
Perhaps more interesting is the way ETFs have evolved. What started as a passive, transparent, low-fee vehicle has spawned an array of diverse strategies across more complex assets, with the option of active semi-transparent and non-transparent structures. Additionally, regulatory shifts have reduced barriers to entry: The ETF Rule change in 2019 eased issuance for most ETF launches and helped attract active strategies, which comprised more than half of all ETF launches last year. The potential approval of issuer regulatory filings could further blur the lines between fund types, where managers could offer dual share classes of mutual funds and ETFs within the same fund structure.
One surprising twist has seen hedge funds - traditionally known for their opacity and illiquidity - show growing interest in the ETF wrapper. Here, ETFs can use indices to proxy the returns of hedge fund portfolios by allocating to more liquid assets or simply replicating their reported holdings. It’s an interesting hybrid of two very different fund types, where the listed nature of ETFs means investors no longer need to make a trade-off between liquidity and access to certain hedge fund strategies. ETFs have already changed the ‘fundamentals’ of fixed income - helping shift a less liquid asset class dominated by institutions into one that’s traded intraday by retail investors. Could they have a similar influence on hedge funds?
More broadly, we’re seeing ETF issuers respond to growing interest in alternative assets like private credit and securitized mortgages. Strategies like fixed maturity and outcome-oriented ETFs are popular, while thematic ETFs are becoming so evolved that certain funds even use machine learning to pick investments. In response, ICE continues to expand its index offering and as ETFs become more bespoke, our customization tools can help issuers prototype new benchmarks, backed by a wealth of data and history. It's been a fast evolution. As BlackRock’s Steve Laipply, Global Co-Head of iShares Fixed Income ETFs, has noted, the last time yields were this high in the early 2000’s, retail investors didn’t have an easy way to gain exposure to bonds. Today, they face an almost baffling array of choice.
ETF outlook: in conversation with BlackRock
Exchange-traded funds have fundamentally changed fixed income market structure, with an ever-broadening array of strategies on offer. BlackRock’s Steve Laipply speaks with ICE’s Varun Pawar on what’s next for the sector, the rise of active management, and key trends he’s watching across the globe.
New transparency into mortgages for capital markets participants
The lack of centralized, timely data in the mortgage sector has long posed a challenge to capital markets participants. Over the past decade, ICE has created a platform of technology, data and analytics to boost mortgage transparency - so users can better quantify mortgage-related risk and enhance their investment processes.
Gaining a portfolio-wide view of global climate risk
As climate risks become more material in financial markets, investors can use next-generation global datasets from ICE Climate to gain a global, portfolio-wide view of risk exposure across corporate and sovereign asset classes. The granularity of this data allows ICE to aggregate and assess climate risks anywhere in the world.
Data & analytics that drive the mortgage ecosystem
Julian Grey, Senior Director of Mortgage Data & Analytics at ICE, joins Varun Pawar, Chief Product Officer at ICE Data Service, to discuss how ICE is combining technology and data to position itself as a leader in the mortgage technology industry.
First-Time Homebuyers Comprise Record Share of Agency Purchase Lending
First-time homebuyers comprised 58% of Agency Purchase lending in Q1 2025 – the highest share on record. While repeat-buyer activity has softened markedly from pre-pandemic levels – with originations among this group down 31% compared to 2018 and 2019 – FTHB volume has fallen only 19%. Purchase lending overall has made up a larger share of issuance in recent years, with purchase loans accounting for a record 82% of agency lending in 2023, more than 75% last year, and nearly three-quarters in Q1 2025.
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