Masters in Business: Insights from BlackRock’s Stephen Laipply on Fixed Income ETFs

Episode Title: BlackRock's Global Co-Head of iShares Fixed Income ETFs Stephen Laipply
Release Date: June 20, 2025
Host: Barry Ritholtz, Bloomberg Radio

Introduction

In this episode of Masters in Business, Barry Ritholtz engages in a comprehensive discussion with Stephen Laipply, the Global Co-Head of Bond ETFs at BlackRock. With a career spanning Bank of America Merrill Lynch and Barclays Global Investors before joining BlackRock in 2009, Laipply offers deep insights into the bond and ETF markets, the impact of Federal Reserve policies, and investment strategies in volatile times.

Stephen Laipply’s Background and Career Path

Barry begins by delving into Stephen Laipply’s academic and professional journey. Laipply earned his B.S. in Finance from Miami University in Ohio and an MBA in Finance from Wharton. Initially considering a career in medicine, a friend's influence steered him toward finance, where he found a passion for the diverse and complex world of fixed income.

Stephen Laipply [03:33]: “I did start off thinking... I decided to try doctor. I love biology. Organic chemistry, not so much. A friend suggested finance, I took a class, and I was hooked.”

Laipply’s transition from Bank of America Merrill Lynch, where he focused on interest rate structuring and strategic solutions for institutional clients, to Barclays Global Investors, and eventually to BlackRock, highlights his expertise in managing and innovating within the fixed income and ETF spaces.

The Attraction to Fixed Income and ETFs

When discussing what drew him to fixed income, Laipply emphasizes the variety and complexity of the instruments involved. Unlike equities, fixed income offers a multitude of cash flows and structures, making it intellectually stimulating.

Stephen Laipply [04:26]: “Fixed income... you can have so many different types of instruments and cash flows and structures. It was just really interesting to me to see that variety.”

Exploring the vast number of bonds available, Laipply notes that fixed income markets often surpass the breadth of equities, with millions of CUSIPs (unique bond identifiers) in circulation.

Transition to BlackRock and Growth of Bond ETFs

Laipply recounts his move to BlackRock in 2009, spurred by an introduction from a mentor and personal discovery of bond ETFs. Fascinated by the efficiency and accessibility of bond ETFs, he was impressed by how they allow investors to trade bonds on exchanges without the complexities of purchasing individual securities.

Stephen Laipply [13:10]: “I was really blown away by that and I could not stop... fascinated by the idea that you could take bonds and put them on exchange.”

At BlackRock, Laipply oversees over $1 trillion in bond ETFs, contributing to BlackRock's overall assets, which stand around $12 trillion. He anticipates the bond ETF industry to grow to $6 trillion by 2030, driven by continuous double-digit growth and increasing adoption during stressed market conditions.

The Resilience of Bond ETFs in Volatile Markets

A significant portion of the discussion centers on the performance and resilience of bond ETFs during market turmoil. Contrary to skepticism, Laipply points out that bond ETFs have consistently maintained liquidity and trading volumes during crises, such as the financial crisis, COVID-19 pandemic, and recent tariff-induced volatility.

Stephen Laipply [21:53]: “...the exchange keeps trading even if the underlying doesn't. Unlike, you know, the fears, you don't see these quote unquote forced redemptions or anything like that.”

These periods of stress have actually fueled the adoption of bond ETFs, as investors seek reliable trading mechanisms when traditional bond markets falter. Laipply emphasizes that bond ETFs provide a robust alternative, allowing substantial investors to manage portfolios efficiently even in turbulent times.

Active vs. Passive Investing in Fixed Income

Barry and Stephen delve into the debate between active and passive (index) investing within fixed income. While active management in equities often underperforms benchmarks, Laipply argues that fixed income presents different dynamics. The fragmented and less liquid market of bonds offers more opportunities for skilled active managers to add value, particularly through security selection and sector tilting.

Stephen Laipply [28:26]: “We believe in all of the above. The best portfolios have elements of both... Index and 'active' together.”

Laipply advocates for a blended approach, combining passive index exposure with active management to optimize returns and manage risks effectively.

Investment Strategies Amidst Current Market Conditions

Addressing the current spike in bond market volatility, Laipply outlines the factors contributing to this instability, including aggressive rate hikes by the Federal Reserve as a response to inflation, fiscal stimuli, and geopolitical tensions like tariffs. He notes that the bond yields have experienced significant fluctuations, creating both challenges and opportunities for investors.

Stephen Laipply [39:36]: “...we just sort of do this large, you know, kind of sine wave between, you know, call it sort of high threes and high fours.”

Laipply recommends focusing on the intermediate part of the yield curve, which he finds particularly attractive, balancing yield and risk. He also highlights the importance of diversifying across different segments of the fixed income market to build a resilient portfolio.

Duration Management and Yield Expectations

Laipply discusses duration management, advising investors to consider the intermediate duration (3-7 years) as optimal in the current environment. He cautions against overextending into long-term bonds due to increased term premiums and fiscal uncertainties.

Stephen Laipply [52:52]: “...we think that's a sweet spot. It doesn't mean that you should have zero long-term bonds.”

Regarding yield expectations, Laipply suggests that while there's potential for yields to edge higher, the market predominantly anticipates stabilization with possible slight increases, rather than dramatic shifts.

Advice for Investors and Career Insights

Towards the conclusion, Laipply offers valuable advice for recent graduates and aspiring investors:

1. Passion for Markets: “You have to really love the idea of markets... the markets find a way.”
2. Diversification and Long-Term Thinking: Emphasizing the importance of diversified portfolios and avoiding the pitfalls of chasing hot investments.
3. Learning from Mistakes: Laipply reflects on his early career mistakes, underscoring the significance of avoiding fee-heavy products and maintaining a diversified approach.

Additionally, Laipply shares personal interests, revealing his fondness for history books and documentaries, particularly those by Ken Burns, and his enjoyment of series like "Friends."

Notable Quotes with Timestamps

• Stephen Laipply [03:33]:
  “...you can just stop down and say, all right, if I’m looking at my portfolio holistically, I want a certain beta... the fees matter as well.”

• Stephen Laipply [16:04]:
  “The industry is approaching 3 trillion... we think that number is going to get to six by the end of the decade.”

• Stephen Laipply [28:26]:
  “We believe in all of the above. We think the best portfolios have elements of both of these things. Index and quote unquote, active together.”

• Stephen Laipply [39:36]:
  “We had Covid... we saw probably our largest wave of adoption in fixed income ETFs was during that period of time.”

• Stephen Laipply [52:52]:
  “We think that's a sweet spot. It doesn't mean that you should have zero long-term bonds.”

• Stephen Laipply [64:54]:
  “Find what you love and be really, really honest with yourself. It’s fair to say I don’t know yet.”

Conclusion

Stephen Laipply’s expertise provides listeners with a nuanced understanding of the fixed income and ETF landscapes. His insights into the resilience of bond ETFs, the blend of active and passive investing strategies, and practical investment advice are invaluable for both institutional and individual investors navigating today’s volatile markets. Laipply’s emphasis on passion, diversification, and long-term planning underscores the foundational principles essential for successful investing.

For those interested in further exploring the intricacies of bond ETFs and fixed income strategies, this episode of Masters in Business offers a wealth of knowledge straight from one of the industry's leading experts.

Listen to the full episode on Bloomberg Radio or your favorite podcast platform.