Advisor familiarity pushes fixed-income ETFs deeper into client portfolios

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Cerulli research shows bond-focused ETFs attracting stronger flows as issuers roll out more taxable, municipal, and active strategies.

Financial advisors are becoming a central force behind the rapid expansion of fixed-income ETFs, prompting issuers to step up product development and education, according to new research from Cerulli Associates.

Cerulli’s latest research finds that as more advisors use ETFs to implement fixed-income exposures, issuers are racing to meet what they see as meaningful unmet demand in the bond sleeve of client portfolios. That is helping shift flows toward both passive and, increasingly, active fixed-income strategies.

By Cerulli’s reckoning, assets in taxable fixed-income ETFs climbed from $1.2 trillion in 2022 to nearly $2 trillion by the end of the third quarter of 2025. Tax-free fixed-income ETFs also grew over the same period, from $106 billion to $165 billion.

Over the last three years, more than 300 new fixed-income ETFs have come to market, expanding the menu well beyond traditional index-tracking funds into defined outcome, derivative income, and other more complex structures.

Cerulli ties much of that growth directly to the way advisors are now using ETFs in the bond portion of portfolios. The firm’s 2025 ETF issuer survey shows 71% of issuers rank greater advisor familiarity with fixed-income ETFs as a top-three driver of expected flows over the next two years.

“As ETF issuers expand their product lineups, they also continue to develop a more robust educational platform, providing advisors with additional resources to better understand how these products operate and behave in various market conditions,” Lyons said in a release. “This has allowed advisors to become more comfortable and familiar with fixed-income ETFs.”

That combination of advisor demand and a more favorable rate backdrop is shaping issuer priorities. Fifty-nine percent of ETF issuers cite US fixed income as the asset class with the greatest unmet demand, well ahead of other categories such as derivative income. Within fixed income, 87% point to taxable strategies as a primary or secondary focus for new ETFs, followed by international and global fixed income at 65%, municipal strategies at 63%, and defined-outcome products at 38%.

Issuers also see the current yield environment as a tailwind. After years of low rates, higher bond yields are drawing more investor interest to fixed-income ETFs as tools for income and risk management. Cerulli notes that 38% of issuers identify higher-yielding fixed-income exposures as a top-three factor expected to drive ETF flows over the next two years.

At the same time, the product mix is moving toward active management. Cerulli’s survey shows 94% of ETF issuers are developing or planning to develop transparent active ETFs, while 72% say they have no plans to roll out new passive cap-weighted ETFs, another sign of the end of the race to the bottom in ETF fees. In active fixed income, JPMorgan, First Trust, Janus, and PIMCO sit atop the leaderboard, backed by flagship strategies in ultra-short, CLO, and core bond categories.

“During uncertain and potentially volatile times, ETFs allow investors to quickly adjust duration, credit quality, and sector exposure without the need to trade individual bonds,” the report says.