The December issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the stories, "WSJ Looks at Active vs. Passive Bond Funds: All About the Agg," which discusses the predominance of active funds in the space, and "Payden & Rygel's Kerry Rapanot on Rethinking Cash," which quotes from a recent media briefing. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns rebounded in November 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.) (Note: We're still taking registrations for our "basic training" event, Money Fund University, which is Dec. 19-20 in Providence, R.I. MFU Attendees and Subscribers may access the MFU Conference Materials here.)

BFI's "Active vs. Passive" article states, "The Wall Street Journal writes on 'Why Few Bond Funds Are Passively Managed -- and How to Create Your Own.' The article states, 'The index-fund revolution has been slow to take over bond funds. Investors are paying the price for that. Passive funds, which aim to match an underlying index rather than beat it, now make up 62% of all U.S. stock funds, according to Morningstar, driven in large part because the indexers tend to outperform active stock pickers and their fees are minimal.'"

They explain, "But active managers still hold 57% of assets in U.S. taxable bond funds. Some experts say that is partly because the most commonly used bond index -- the Bloomberg U.S. Aggregate, or Agg -- is easier to beat than stock indexes because it holds only investment-grade debt and omits several higher-performing but riskier categories."

Our "Payden" article states, "Payden & Rygel recently hosted a media briefing on low duration bond strategies featuring Director Kerry Rapanot, a member of their Low Duration Strategy leadership team. Rapanot says, 'It's a good time to be talking about cash. We've reached a new peak in money fund assets at $7 trillion. We went from the lower band of zero back in 2022 all the way to 5.25% in the summer of 2023. Finally, this past September, the Fed began their easing cycle. We had a 50-basis points rate cut in September and then another 25 basis point cut just recently here in November. The market is split 50/50 as to whether we will get another move at the final meeting of the year in December. The official Payden call is for another 25 basis points, so that would bring the lower band down to 4.25%.'"

She continues, "Now as yields are decreasing as the Fed is cutting the federal funds rate, yields on money market funds are declining. It's a bit of a surprise to us to see fund balances continuing to increase, as that $7 trillion number is eye popping. While we've reached these new highs, prime institutional funds are the only category with net outflows this year, down by over half of the assets under management and expected to continue to shrink. This is directly a result of the SEC’s latest round of reforms, which went into place this year."

Our first News brief, "Returns Rebound, Yields Mixed in Nov.," explains, "Bond fund returns were higher in November after a dip last month (which followed 5 straight months of gains). Yields were lower on the short-end and higher on the long end. Our BFI Total Index rose 0.98% over 1-month and 7.53% over 12 months. (Money funds rose 5.15% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 1.01% in Nov. and rose 7.73% over 12 mos. Our BFI Conservative Ultra-Short Index was up 0.46% over 1-month and 5.86% for 1-year; Ultra-Shorts rose 0.48% and 6.33%. Short-Term returned 0.47% and 6.64%, and Intm-Term rose 1.08% in Nov. and rose 7.62%. BFI's Long-Term Index was up 1.26% and up 8.31%. High Yield returned 1.12% in Nov. and 10.90% over 12 mos."

A second News brief, "Morningstar Says, 'Stock Funds Floundered in October, With Investors Opting for Bond Funds and Alternatives,' They write, 'Investors gravitated toward safety: Equity funds floundered; fixed-income funds enjoyed strong inflows.... Taxable-bond funds continued their tremendous year, gathering $59 billion of inflows in October. That marked their best month since April 2021 in absolute terms and when scaled for assets. Investors have piled $413 billion into taxable-bond funds in 2024, nearly 9 times the amount of the next-closest category.'"

Our next News brief, "MarketWatch Writes 'Bond Funds on Pace for Second-Biggest Yearly Inflows in a Decade,' They explain, 'U.S. bond funds were on pace for their second-highest year of inflows in a decade, according to Barclays Research. This year already has seen $517 billion of inflows stream into U.S. bond funds, behind only the $592 billion gathered in 2021, the highest yearly influx since 2014. Investors pulled about $250 billion out of bond funds as the Fed began cutting rates, reducing the appeal of low coupon bonds created in the past decade.'"

A BFI sidebar, "TCW Launches New ETFs," states, "'TCW Significantly Expands ETF Offerings, Unveiling Five New Actively Managed Fixed Income ETFs' says a press release. It explains, ‘The TCW Group ... announced today a significant expansion of TCW's suite of actively managed ETFs to advisors, investors, and institutions, with the launch of two new fixed income exchange-traded funds (ETFs) and the conversion of three other fixed income mutual funds to ETFs.'"

Finally, another sidebar, "Vanguard Debuts Muni ETFs," says, "A press release, 'Vanguard Launches Two Active Municipal ETFs,' tells us, 'Vanguard ... launched Vanguard Core Tax-Exempt Bond ETF (VCRM) and Vanguard Short Duration Tax-Exempt Bond ETF (VSDM), two active municipal ETFs managed by Vanguard Fixed Income Group. The new ETFs offer diversified exposure to municipal bonds across sectors, states, and credit quality with the potential to outperform their benchmarks over the long term.'"

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