Tony Kelly, Goldman’s former global head of ETF product development and strategy, has joined the founding team at fixed-income ETF specialist BondBloxx Investment Management.
The company is the first ETF issuer to solely focus on fixed-income investors. According to the prospectus it filed with the Securities and Exchange Commission, the firm currently has seven high-yield investment portfolios across different sectors, including industrials, telecommunications, healthcare, energy, consumer cyclicals, and consumer non-cyclicals. Other founding members of BondBloxx include ETF veterans from Blackrock’s iShares, State Street, J.P. Morgan, HSBC, and Northern Trust.
“Innovations in the bond market, combined with the increased adoption of fixed-income ETFs, represent a tremendous opportunity for BondBloxx,” Kelly said.
BondBloxx is getting into the business as some automation finally comes to bond markets. A market structure that has defied electronic solutions for decades has made transacting in bonds more difficult and the process fairly opaque. But that’s changing. By taking advantage of improved price transparency and electronic trading technology in the market, BondBloxx aims to provide more precise exposure to fixed-income ETF investors. “Fixed income is so much bigger and so much [more] varied than the equity market. There is clearly a mismatch in terms of choices for clients,” Kelly told Institutional Investor. “We hear this every day — there is more interest in more specific exposures in the fixed-income marketplace.”
The fact that the number of fixed-income ETFs is dwarfed by that of equity ETFs implies huge investment opportunities, Kelly said. Part of that is due to the fact that equity ETFs were introduced eight years earlier than the fixed-income variety, but there were also “nuances around the market structure” that had slowed the growth of the latter. Now, however, new trading technologies have “made it [easier] for market makers to trade fixed-income ETFs” and have created opportunities for BondBloxx.
“Delivering fixed-income ETFs can be challenging given the differences in market structure and price transparency,” said Joanna Gallegos, a BondBloxx co-founder who formerly oversaw the ETF business at J.P. Morgan and BlackRock. “But bond markets are evolving, and this team is singularly focused on creating new products designed to deliver the benefits of ETFs to fixed-income investors.”
Prior to his career at Goldman Sachs, Kelly spent more than 14 years at BlackRock, where he served as managing director and head of iShares Product Management. He oversaw over 100 iShares ETFs, established the iShares Capital Markets Group, and launched some of the largest fixed-income ETFs on the market.
“I have spent my career developing products and processes that enable investors to access unique market exposures, and I’m incredibly excited to do that alongside this team of innovators at BondBloxx,” Kelly added.
“Tony is a trailblazer in the ETF industry,” said Leland Clemons, who is another BondBloxx co-founder and who also spent more than a decade managing BlackRock’s ETF business. “His passion for innovation will help BondBloxx to build and manage products that deliver on this mission for investors.”