The May issue of our Bond Fund Intelligence, which was sent to subscribers Tuesday morning, features the stories, "Bill Gross Blasts Bullish Bond Fund Managers, Bond Funds," which critiques bond funds selling total return, and "Capital Group on Active ETFs; PIMCO on Core Bond Funds," which quotes from a recent American Funds piece. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell in April while yields were higher. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)
Our "Gross Blasts" article states, "Bill Gross posted a piece titled, 'They Just Wanna Sell You a Bond Fund,' which takes a shot at all the bullish forecasts of bond fund managers. He writes, 'No not Pimco -- or me.... No, I'm talking about investment managers touting bullish forecasts for 4.60% 10-year Treasuries. Pimco's not one of 'em nor am I. Reunited in spirit at least. But many managers are bullish on bonds.'"
The piece continues, "Gross explains, 'Vanguard's Total Bond Market Index Fund has provided a negative 0.1% total return over the last 5 years -- includes income plus percentage price change. Now, however, bond bulls cite 2-3% forward inflation and a Fed cut, two, or three to suggest 10-year yields move to 4% which would produce a 7%+ total return for the balance of 2024. Not gonna happen in my view.'"
Our "Capital Group" article states, "American Funds' Capital Group recently published an article titled, 'Why you should be leaning into active fixed income ETFs,' which quotes its President & CEO Mike Gitlin, 'Active bond management has come to the ETF market, and it's a true benefit for clients.... It means they no longer need to settle for benchmark results and the limited interest rate and credit flexibility that may come with passive bond management.'"
It states: "The piece says, 'The overall market for fixed income mutual funds is $4.5 trillion, and 78% of those assets are actively managed, showing a preference for active management of fixed income mutual fund assets. ETFs in comparison, while increasingly popular, have only $1.5 trillion in assets under management and $176 billion in active fixed income ETFs -- despite the preference for active management in the other commonly used investment vehicle. This chasm could be the result of a historical lack of active ETF availability and less understanding about active ETFs.'"
Our first News brief, "Returns Retreat, Yields Jump in April." says, "Bond fund returns fell in April, while yields jumped. Our BFI Total Index fell 1.18% over 1-month but is up 3.10% over 12 months. (Money funds rose 5.20% over 1-year as measured by our Crane 100 Index.) The BFI 100 decreased 1.58% in April but rose 1.91% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.30% over 1-month and 5.51% for 1-year; Ultra-Shorts rose 0.25% and 5.95%. Short-Term returned -0.80% and 3.88%, and Intm-Term fell 2.12% in April and fell 0.10% over 1-year. BFI's Long-Term Index fell 2.70% and 0.61%. High Yield fell 0.60% in April but is up 8.26% for 12 mos."
A second News brief, "Barron's on 'How to Be Smart About Your Bond Strategy," comments, "Bonds have disappointed in recent years, burning investors with losses and leading some to wonder if they should bother with them at all. Short answer: Yes, but it pays to be strategic.... Amplifying that concern is the fact that cash remains an attractive alternative. Why take a chance of bond losses when you can get risk-free yields of 5% in money-market funds? Bond mutual funds and exchange-traded funds may be more volatile, but they offer more liquidity and a much more affordable entry point for investors than individual bonds."
Our next News brief, "Bloomberg Says, 'Bond Mutual Funds Rake in $108 Billion to Break Two-Year Exodus.' The article says, 'Fixed-income mutual funds are doing something rare: Attracting new money -- and besting their tax-efficient ETF brethren. Nearly $110 billion has flowed into mutual funds so far this year, with the bulk of the cash gravitating towards active managers, Bloomberg Intelligence data show. It breaks two straight years of net outflows that saw the industry bleed more than half a trillion dollars.'"
A BFI sidebar, "Payden Limited Maturity 30," says, "A press release titled, 'Payden & Rygel Celebrates 30 Years of the Limited Maturity Fund (PYLMX) Amidst Four Decades of Investment Excellence,' tells us, 'Payden & Rygel is proud to announce the 30-year anniversary of its Limited Maturity Fund (PYLMX). This milestone coincides with the firm's celebration of 4 decades as a global investment adviser.'"
Finally, another sidebar, "Barron's Bearish on Bonds" comments, "Barron's is almost always bullish on bond funds, but even they've been concerned of late. 'Bonds Are a Minefield. Where to Find 5% to 8% Yields Now,' tells us, 'It was supposed to be a banner year for bonds. Instead it has been a bust so far. But the rest of the year could be more fruitful, if you know where to look. The U.S. bond market is once again proving to be a minefield. Falling prices have pushed bond total returns down an average 3% this year, and no area of the market has been spared.... The 'higher for longer' scenario is punishing bonds. The 10-year Treasury yield has leapt from 3.95% at the end of 2023 to 4.63%. Overall, long-term bonds are down nearly 9% in total return for the iShares 20+ Year Treasury Bond ETF. On an annualized basis, long-term Treasuries are enduring their worst stretch in 65 years."
