Robeco: Bond ETFs hampered by low liquidity

Illiquidity in corporate bond markets make it hard for firms to generate index-like returns

Low liquidity levels in the fixed income markets have led investment grade and high yield exchange traded funds to rack up higher-than-expected tracking errors and lower performance, asset manager Robeco said.

In a recent report, Patrick Houweling, head of quantitative credit research at the Dutch firm, found the tracking error for high-yield ETFs ranged from 7.3% to 12%, while the highest average tracking error for investment grade ETFs reached 1.63%.

There are only three high yield ETFs in the