The July issue of our Bond Fund Intelligence, which was sent to subscribers Monday morning, features the stories, "Worldwide BF Assets Jump to $13.0 Trillion, Led by U.S.," which quotes from ICI's latest global asset totals, and "Ho, Sabatino, Weaver Discuss Alt-Cash, Ultra-Shorts at MFS," which excerpts from our annual Money Fund Symposium held in Pittsburgh last month. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rose in June while yields were mixed. 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.)
BFI's "Worldwide" article states, "Bond fund assets worldwide increased in the latest quarter to $13.0 trillion, led higher by four of the largest bond fund markets -- the U.S., Luxembourg, Ireland and China. We review the ICI's 'Worldwide Open-End Fund Assets and Flows, First Quarter 2024' release and statistics below."
The piece continues, "ICI's report says, 'Worldwide regulated open-end fund assets increased 0.5% to $69.17 trillion at the end of the first quarter of 2024.... The Investment Company Institute compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA).'"
Our second article states, "Crane Data hosted its Money Fund Symposium conference last month in Pittsburgh, which featured a segment titled, 'Alt-Cash: Ultra-Short Bonds, SMAs & Offshore' with Teresa Ho of J.P. Morgan Securities, Rob Sabatino of UBS Asset Management and Jeff Weaver of Allspring Global. Ho says, 'If we just focus on liquidity investors, what we find is that aggregate balances have generally trended higher since the pandemic.... There's still a lot of cash in the front end.... But focusing on the ultra-short and short-term bond funds ... I think it's fair to say that they haven’t been getting the love that they deserve.' (Note: Materials are available in our 'Money Fund Symposium 2024 Download Center.')"
It states, "She explains, 'Flows in the sector have generally been trending lower over the past couple of years. Notwithstanding a couple of months of inflows ..., the sector has consistently seen outflows, ... though the outflows have moderated recently. [T]hese flows pale in comparison to what's been happening in money market funds.'"
Our first News brief, "Returns Up Again, Yields Lower in June," states, "Bond fund returns were higher again in June, while yields were lower. Our BFI Total Index rose 0.90% over 1-month and is up 5.31% over 12 months. (Money funds rose 5.26% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 0.87% in June and 4.85% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.49% over 1-month and 5.79% for 1-year; Ultra-Shorts rose 0.49% and 6.40%. Short-Term returned 0.64% and 6.00%, and Intm-Term rose 1.02% in June and 3.75%. BFI's Long-Term Index was up 0.95% and 3.37%. High Yield rose 0.83% in June and 9.48% for 12 mos."
A second News brief, "J.P. Morgan Asks in 'Short Duration Bond Fund Update: Are the Tides Turning?' They write, 'For the first time in a while, flows into low-duration bond funds turned positive in May.... Among the ultra-short and short-term bond funds we track, AUMs increased by $4.6bn on the month. All fund strategies experienced inflows, led by short-term credit.... This is in contrast to the persistent decline in AUMs that has marked much of this sector over the past year.'"
Our next News brief comments, "MarketWatch's 'Bond Funds on Record Pace,' explains, 'Investors have been pouring into bond funds this year as interest-rate cuts begin trickling out from global central banks. Bond funds have attracted nearly $400 billion in net inflows already this year -- about 51% of the full-year record total set in 2021, according to EPFR data. 'Actively managed funds have absorbed the biggest share of the flows so far this year,' said Cameron Brandt, director of research at EPFR, in a ... client note.'"
A BFI sidebar, "MStar: PIMCO's Schneider," says, "Morningstar writes on 'How Investors Can Outpace the Returns of Money Market Funds.' They ask PIMCO's Jerome Schneider, 'How attractive are money markets these days relative to other short-term opportunities?' He responds, 'It's a $6 trillion question at this point in time.... Listen, there's a great amount of opportunity for investors to be defensive and in fact safe by earning 5% plus or minus in money market and T-bill-like investments. We fully understand that, as investors, and understanding why people want to have that beautiful triumvirate of capital preservation, liquidity management, with some positive return for once. But what we also are finding is that ... if you move just slightly beyond the money market space into that zero to one-year space in a more diversified portfolio ... you can have additional opportunities through earning additional income [in] corporate bonds as well as asset-backed securities.... And it puts a total return metric well above 6% at this point in time without taking much interest-rate exposure.'"
Finally, another sidebar, "EFAMA's 2024 Fact Book" tells readers, "EFAMA, the European Fund and Asset Management Association, published its annual 'Fact Book,’ which includes statistics on European funds and a section on European bond funds. They write, 'The sudden and severe monetary tightening of 2022 ... resulted in a decrease in the valuations of existing bonds and substantial net outflows from bond UCITS. In 2023, conversely, bond UCITS rebounded as interest rates stabilized. [C]entral banks ended their consecutive rate hikes, and by year end, some investors were even anticipating potential rate cuts in 2024. This optimistic outlook fueled a ... rally in 2023, with inflows reaching E144 billion, a notable contrast to the net outflows the year before.'"
