J.P. Morgan writes in a new "Mid-Week US Short Duration Update" that "Low-duration bond funds see strong inflows to start the year." They explain, "Low-duration bond funds have had a strong start to the year, both in terms of inflows and returns. According to the funds we track, collective inflows over the first two months have reached nearly $25bn, marking a 3% increase from December's month-end levels, with total balances now at $850bn. The majority of these inflows occurred in February, which saw a significant increase of $15bn, the largest monthly inflow since early 2021. During this month, all strategies experienced growth in balances, with short term credit funds witnessing the most inflows, amounting to about $4bn. This was closely followed by ultra-short multi-asset funds and ultra-short credit, each attracting $3bn, along with short-term multi-asset and short-term government funds, which each received $2bn." (Note: J.P. Morgan's Teresa Ho, who authored this piece, will lead the keynote address at next week's Bond Fund Symposium, March 27-28 in Newport Beach, Calif. She will be joined by PIMCO's Jerome Schneider and J.P. Morgan Asset Management's Dave Martucci. We're still taking registrations!)
The update continues, "February also marked a period where low-duration bond funds achieved their strongest returns over the past four months, partly due to the rally in rates.... In the short end of the curve, the 2-year Treasury yield declined by 24bp during February, pushing the yield to 3.99% at month-end and driving the 1m2y yield curve to -25bp, compared to about flat at the start of the month. This trend is consistent with what we observed last year, where bond fund flows closely mirrored changes in front-end yields, which in turn can impact bond fund returns."
JPM states, "Comparatively, short-term bond funds, with an average effective duration of 1.5-3.5 years, have consistently outperformed their ultra-short counterparts, which typically have a duration of 0.5-1.5 years. Over the past month, these short-term funds have maintained a spread advantage of up to 54bp compared to similar ultra-short fund strategies. This outperformance is even more pronounced over a 1-year period, with short-term funds achieving a yield pickup of as much as 73bp over ultra-short funds."
The brief adds, "It's also worth noting that low-duration funds have generally outperformed both government and prime MMFs across 1-month to 1-year returns. Overall, investors appear to be drawn to the low-duration bond fund space due to these strong returns. Plus, a recent article has suggested that inflows may be linked to recessionary concerns.... Given these factors, we wouldn't be surprised if low-duration funds continue to gain traction throughout the year."
In other news, a press release, "Public Trust Advisors, LLC and the PMA Companies Have Combined to Create an Integrated Financial Services Firm," says, "Public Trust Advisors, LLC and the PMA Companies have combined to create an integrated financial services firm serving over 12,000 local governments and other public entities across 26 states. The combined company, PTMA Financial Solutions (PTMA), which is led by Todd Alton, will honor the rich history of the merging companies, reflecting the values and traditions that have shaped their journey together."
The release explains, "Public Trust Advisors, LLC (Public Trust), founded in 2011 to manage the investment needs of local governments across the nation, and the PMA Companies (PMA), founded in 1984 to provide customized, integrated financial solutions to the public sector and other institutions, announced the completion of a transaction to combine the firms. Together, Public Trust and PMA offer a wide array of financial products and services that aim to strengthen communities from coast to coast, including local government investment pool administration, investment advisory services, term investments, cashflow analysis, bond proceeds management, and public finance services for public entities, plus stable deposit funding solutions for financial institutions."
It continues, "The combined firm works with clients across 26 states to provide customized financial solutions to over 12,000 local governments and other public entities. The organization also partners with over 1,000 financial institutions to offer competitive deposit rates to public entities.... Todd Alton, former CEO of Public Trust, will lead the new firm as CEO, with Jim Davis, former CEO of PMA, serving as Executive Chairman of the Board of Directors.... The terms of the transaction were not disclosed. Public Trust's investment partners remain majority owners, with employees owning a substantial minority."
Finally, the `Investment Company Institute published, "Retirement Assets Total $42.3 Trillion in Fourth Quarter 2024," which includes data tables showing that money market funds held in retirement accounts jumped to $880 billion (up from $843 billion) in the latest quarter, accounting for 13% of the total $6.852 trillion in money funds. MMFs represent just 6.7% of the total $13.2 trillion of mutual funds in retirement accounts.
This release says, "Total US retirement assets were $42.3 trillion as of December 31, 2024, about unchanged from September and up 10.2 percent for the year. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of December 2024. Assets in individual retirement accounts (IRAs) totaled $15.2 trillion at the end of the fourth quarter of 2024, a decrease of 0.2 percent from the end of the third quarter of 2024."
It continues, "Defined contribution (DC) plan assets were $12.4 trillion at the end of the fourth quarter, down 0.3 percent from September 30, 2024. Government defined benefit (DB) plans—including federal, state, and local government plans -- held $8.9 trillion in assets as of the end of December 2024, a 1.5 percent increase from the end of September 2024. Private-sector DB plans held $3.3 trillion in assets at the end of the fourth quarter of 2024, and annuity reserves outside of retirement accounts accounted for another $2.5 trillion."
The ICI tables also show money funds accounting for $660 billion, or 10%, of the $6.533 trillion in IRA mutual fund assets and $220 billion, or 3%, of the $6.660 trillion in defined contribution plan holdings. (Money funds in 401k plans totaled $147 billion, or 3% of the $5.291 trillion of mutual funds in 401k's.)
