For years, asset managers and asset owners used fixed income ETFs more at the margin – for tactical allocations or temporary exposure to a hard-to-access asset class. Some were put off by fixed income ETFs’ relative adolescence. And, while fixed income ETFs performed under various stresses over the past decade, others theorized about what might happen in the event of a true shock.

Then came the long-awaited test for fixed income ETFs: The COVID-19 health crisis materialized in the first half of 2020, rattling economies and bond markets around the world. Liquidity, price discovery, usage and transaction costs were severely challenged across multiple asset classes in the bond markets, from high yield and investment grade corporates to emerging markets and even – for a brief period – U.S. Treasuries. It was the long-awaited test for fixed income ETFs – and they passed. Through the stresses, the largest and most heavily traded fixed income ETFs generally provided more liquidity, greater transparency and lower transaction costs than the underlying bond market.

It has been 18 years since iShares debuted the first fixed income ETFs – and they are now a grown-up tool for even the most sophisticated investment strategies.