The March issue of our Bond Fund Intelligence, which was sent to subscribers Saturday, features the stories, "EFAMA Says 2024 Record Year for ETFs, MMFs; Bond Funds," which covers a recent press release from EFAMA, and "Vanguard Examines Bond Index Fund Tracking Costs," which excerpts from a recent Vanguard research paper. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns up again in February while yields were slightly lower. 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, and join us for our upcoming Bond Fund Symposium, which is March 27-28 in Newport Beach, Calif.)
BFI's lead article states, "EFAMA, the European Fund and Asset Management Association, published a press release titled, '2024 was a record year for ETFs and MMFs,' which tells us, 'In our latest Monthly Statistical Release, we show the main developments for the European investment fund market in December 2024 and include a first overview and analysis of the full year 2024.'"
It continues, "They quote Bernard Delbecque, Senior Director for Economics and Research at EFAMA, who comments, 'Equity UCITS inflows rebounded in 2024, driven by strong stock market performance. Meanwhile, other UCITS categories followed similar trends to 2023: sustained demand for bond UCITS as interest rates declined, record-breaking net sales of both ETFs and MMFs, and continued net outflows from multi-asset UCITS.'"
Our "Profile" article states, "Vanguard published a paper titled, 'A bond index fund's balancing act: Tracking error and cost.' It tells us, 'Index funds aim to mirror the returns of a market benchmark. For most market capitalization-weighted equity index funds, this is typically achieved by holding all benchmark securities at their respective weights. However, this approach can be impractical for many bond index funds because of the breadth of the bond market and the limited liquidity in certain bonds. This has led to the misconception that if a bond index fund doesn’t fully replicate its benchmark, it can’t track it successfully.'"
It continues, "A section on ‘Managing bond index funds: An art and science,' comments, 'Broad bond benchmarks may contain thousands of bonds; for example, the Bloomberg U.S. Aggregate Bond Index contained more than 13,000 securities at year-end 2024. Yet, matching the return of a broad bond benchmark isn’t simply a function of holding more bonds.'"
Our first News brief, "Returns Up Again, Yields Dip in Feb. Bond fund returns were higher in February after rising in January," says, "Our BFI Total Index rose 1.23% over 1-month and rose just 6.11% over 12 months. (Money funds rose 4.91% over 1-year as measured by our Crane 100 Index.) The BFI 100 increased 1.51% in Feb. and rose 6.42% over 12 mos. Our BFI Conservative Ultra- Short Index was up 0.42% over 1-month and 5.57% for 1-year; Ultra-Shorts rose 0.52% and 5.92%. Short-Term returned 0.86% and 6.37%, and Intm-Term rose 2.00% in Feb. and rose 6.37%. BFI’s Long- Term Index was up 2.33% and up 6.27%. High Yield returned 0.54% in Feb. and 8.50% over 12 mos."
A second News brief, "Barron's on, 'What a Top Bond Fund Manager Is Buying Now.' They write, 'High-quality bonds are on sale, and Pimco Income (PONAX) fund manager Daniel Ivascyn is loading up on them. Ivascyn isn't just any ordinary manager, and the $180 billion Pimco Income is no ordinary bond fund. In the past 15 years under Ivascyn and his two co-managers' stewardship, the fund's retail share class—PONAX—has beaten 97% of its peers in Morningstar's Multisector Bond fund category, with a 6.3% annualized return, also dusting the popular iShares Core U.S. Aggregate Bond (AGG).'"
Our next News brief, "Investment News'. 'Fixed Income ETFs Set Record Pace in February with $42B Inflows' comments, 'Exchange-traded funds attracted $111 billion in net inflows in February, putting ETFs on pace for an unprecedented $1.5 trillion haul in 2025, according to a report from State Street Global Advisors. The month was marked by record flows into fixed-income ETFs, a shift in sector sentiment, and a resurgence in thematic investing.'"
A BFI sidebar, "American Funds' BFofA," states, "Morningstar tells us, 'Why This Fund Is a Top Option for Core Bond Exposure.' They explain, ‘American Funds Bond Fund of America (RBFGX) is leaning into what it does best. This mutual fund’s excellence within the intermediate core bond Morningstar Category has been due to its willingness to fine-tune its balance between incentivizing its managers to pursue a straightforward core bond approach while granting them the flexibility to draw on their respective areas of expertise and broader firm resources. [The fund] collectively mirrors the exposures of the Bloomberg US Aggregate Bond Index. [Principal investment officer Pramod] Atluri has sought to nudge the overall fund portfolio’s risk profile away from interest rates and toward yield spreads, which is more in line with the benchmark’s risk factors.'"
Finally, another sidebar, "ICI Study on 401(k) Options," says, "A new study, 'BrightScope/ICI Defined Contribution Plan Profile: A Close Look at401(k) Plans, 2022,' tells us, 'In 2022, the average large 401(k) plan offered 29 investment options, of which about 13 were equity funds, three were bond funds, and nine were target date funds. Nearly all plans offered at least one domestic equity fund, international equity fund, and domestic bond fund. CITs held 43% of large private-sector 401(k) plan assets in the sample in 2022. Mutual funds held 35% of assets, guaranteed investment contracts (GICs) held 6%, separate accounts held 3%, and the remaining 12% were invested in individual stocks (including company stock), individual bonds, brokerage, and other investments.'"
