Rethinking outdated approaches has come with new challenges for investors.


Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.


Fixed income investors are facing new market realties, as the global economy is moving away from a period of steady growth, stable inflation and supportive central banks. Instead, we are braving a new world of heightened macro volatility, expectations of higher inflation and tighter monetary policies signalling the end of the great period of monetary easing and announcing multiple interest rates rises in the near future. 

Along with the macro and structural fixed income market changes, we are also in the midst of a tectonic shift to sustainable investing and investors are increasingly shifting their portfolio to transition to a low-carbon economy.

What is clear is that the role of fixed income needs to evolve. Investors should incorporate new implementation approaches to address the new markets challenges and make their fixed income allocations work harder in their portfolios.


We recognise the need for investors to incorporate new implementation ideas, and we believe investors could make fixed income work harder in their portfolios through indexing. We identified 3 market challenges and investor needs:

  • PORTFOLIO CONSTRUCTION: Accelerated macro and structural trends have changed the investment environment. Investors need to take a holistic view to build efficient portfolios and take a flexible, nimble asset allocation approach.
  • PRODUCT SELECTION: Building real portfolio resilience today requires a broader range of tools and implementation ideas. Investors need a more granular approach to fixed income allocations while also ensuring diversification and liquidity.
  • SUSTAINABLE TRANSITION: The adoption of sustainable fixed income rose from 17% in 2020 to around 24% in 2021, continuing the exponential growth trend seen since 2018. Many investors are now seeking efficient building blocks to transition to more sustainable fixed income portfolios.1

1 Source: BlackRock Portfolio Analysis & Solutions (BPAS) as of 31/10/2021.


iShares is the investment partner that can help evolve your fixed income portfolio through indexing.


How can I build a diversified fixed income portfolio to address the current resiliency and liquidity challenges?

With high levels of inflation and central banks moving to tighter monetary policies, fixed income assets yields are picking up, which may create more income generation opportunities. In this environment, investors should consider expanding their asset allocation to help capture additional yield.

Fixed income yields pick up after a decade of low rates

The figures shown relate to past performance. Past performance is not a reliable indicator of current or future results.

Sources: BlackRock Investment Institute, Barclays and Thomson Reuters, 30 June 2022. The bars show market capitalisation weights of assets with an average annual yield over 4% in a select universe that represents about 70% of the Barclays Multiverse Bond Index. Euro core is based on French and German government debt indices. Euro peripheral is an average of government debt indexes for Italy, Spain and Ireland. Emerging markets combine external and local currency debt. Index performance returns do not reflect any management fees, transaction costs or expenses. Indices are unmanaged and one cannot invest directly in an index.


Investors need to take a holistic view when building portfolios and make fixed income work harder by utilising indexing.

iShares fixed income indexing provides an efficient, liquid and transparent way to access different sources of return and manage risk in your portfolio.

When you invest with iShares, you get access to the broader added value, experience and expertise of BlackRock to help shape your whole portfolio.


How can I get more granular in my fixed income allocation without sacrificing liquidity or diversification?

In uncertain times, investors face increasing pressure to deliver returns and maintain diversification while ensuring liquidity. They need to employ different tools (including ETFs and index funds) and implementation ideas to those traditionally used and take a more granular approach by focusing on different markets, new countries and credit quality views, as well as specific duration exposures.


Using iShares fixed income indexing as efficient building blocks to implement a more granular approach ensures investors maintain diversification and liquidity in their portfolio.


iShares gives you choice, with the broadest range of Europe-domiciled fixed income UCITS ETFs and index funds, with over 95 funds offering access to almost all parts of the fixed income markets across countries, sectors, credit rating and duration.2

2 Source: BlackRock as of 31/10/2021.


Investors need quality products, built to evolve with changing fixed income markets, investors’ portfolios and regulation. When you invest with iShares, you get access to expertise, rigour and high standards along with the broader added value and experience of BlackRock.

70 Fixed income portfolio managers


iShares fixed income funds are managed by a team of over 703 fixed income portfolio managers globally.

This means that local exposures are managed by teams with local expertise in local markets, and trading activities are managed continuously. Our portfolio managers efficiently minimise transaction costs by sampling the benchmark index while matching risk characteristics.4

Across these regions, the funds are consistently managed on Aladdin®, BlackRock’s global risk management platform to analyse funds across many investment risk factors, incorporate sustainable considerations and stress-test our funds.

Risk: While proprietary technology platforms may help manage risk, risk cannot be eliminated.

3 Source: BlackRock as of 31/10/2021.
4 Source: ‘Index Fixed Income Capabilities’, BlackRock as of 30/06/2021.


The strength of iShares’ infrastructure and the resilience of our fixed income ETFs was tested during the 2020 Covid-19 selloff. During this period iShares ETFs offered price discovery and continued to trade more frequently than the bonds in the underlying portfolio.

During extreme market volatility, iShares ETFs were the most frequently traded ETFs, offering investors real-time pricing on underlying markets.

6.4x Trading volumes soar in volatility vs industry competitors

Source: Bloomberg as at 20/03/2020 for the period 24 February – 20 March 2020.


iShares offers the largest, most liquid Europe-domiciled UCITS ETFs products which can make trading more frequent, efficient and cost effective.6 Additionally, iShares offers pre- and post-trade transparency to provide our investors with more clarity on the impact of their trading activities.

6 Source: Bloomberg, BlackRock as of 31/10/2021.

Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to repay the principal and make interest payments.


How do I transition my fixed income allocation to be more sustainable and measure the impact on my overall financial and sustainable objectives?

As industry wide European sustainable regulations come into effect and internal commitments to transition to a low-carbon economy are made, investors are incorporating sustainability across their portfolios, increasingly going beyond equities and starting to transition fixed income allocations.

Increase in adoption of sustainable fixed income has risen:

17% in 2020 | 24% in 2021

2 Source: BlackRock Portfolio Analysis & Solutions (BPAS) as of 31/10/2021.


As investors increasingly transition their fixed income allocations to become sustainable, they need a transition partner. iShares fixed income indexing, backed by BlackRock, can help investors navigate this transition.


Our iShares range track sustainable fixed income indices that are built with an objective, rules-based approach, giving investors clear visibility into the sustainable criteria used for bond inclusion from independent specialist data providers.

Our detailed sustainable reporting enables investors to see full attribution and daily transparency through a rules-based methodology.

Risk: The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

Risk: Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to repay the principal and make interest payments.

EVALUATE & BUILD YOUR FIXED INCOME ALLOCATION offers information for investors across all our fixed income ETFs. Investors can:

  • EVALUATE: A fund based on various characteristics on iShares ETF product pages.
  • BUILD: A portfolio using iShares fixed income ETFs as building blocks.

Risk: Two main risks related to fixed income investing are interest rate risk and credit risk. Typically, when interest rates rise, there is a corresponding decline in the market value of bonds. Credit risk refers to the possibility that the issuer of the bond will not be able to repay the principal and make interest payments.