The February issue of Crane Data's Bond Fund Intelligence, which was sent out to subscribers Tuesday, features the lead story, "JP Morgan on Ultra-Short Bond 'Alt-Cash' Space," which reviews a recent J.P. Morgan Securities' "Short Term Market Outlook and Strategy". It also includes the article, "BFU: Crane & Hiatt on Ultra-Shorts," which excerpts from our recent Money Fund University session on short-term bond funds. In addition, we recap the latest Bond Fund News, including the brief, "Bond Fund Returns Higher in Jan.; Yields Move Lower." BFI also includes our Crane BFI Indexes, averages and summaries of major bond fund categories. We excerpt from the latest BFI below. (Contact us if you'd like to see a copy of our latest Bond Fund Intelligence and BFI XLS data spreadsheet. Also, for those planning on attending, please register soon and make hotel reservations for our upcoming Bond Fund Symposium, March 23-24 in Boston.)

Our lead Bond Fund Intelligence story says, "J.P. Morgan Securities comments in a recent 'Short Term Market Outlook and Strategy' about ultra-short bond funds and the new 'alt-cash' space. Authors Alex Roever, Teresa Ho and John Iborg write, "Ultrashort and short-term bond funds are one subsector of the non 2a-7 space that have received a relatively increased amount of attention post-MMF reform. These 'alt-cash' vehicles are comprised of ETFs and open-ended mutual funds that invest primarily in high grade fixed income securities maturing anywhere between 6 months to 3.5 years -- well beyond what most consider to be the traditional money market arena."

It continues, "They say, '`We consider a fund to be ultrashort if its average portfolio duration is between 0.5-1.5 years. Funds with average portfolio durations of 1.5-3.5 years are grouped into the short term bond category. Furthermore, within each category, we have identified four prevalent investing strategies -- government, conservative credit, credit, and multi-sector."

JPM tells us, "Government funds invest the majority of their portfolios into US Treasury securities and/or agencies or securities backed by agencies. Conservative credit funds mainly buy A-rated or higher corporate bonds. Credit funds are somewhat risker, in that they invest in corporates down to BB. Lastly, multi-sector funds allocate their respective portfolios across corporates, securitized products, Treasuries and cash at their own discretion."

BFI's BFU Profile says, "Last month, Crane Data hosted its 'basic training' Money Fund University event, which included a segment on ultra-short bond funds entitled, 'Bond Fund University.' This last session featured our `Peter Crane, as well as Eric Hiatt, Director & PM at BlackRock. We excerpt from some of the comments and issues discussed during this segment below."

Crane explained, "One of the things we're going to hit and focus on is just trying to find definitions within the ultra-short bond fund category. My clients, money market funds, issuers, everybody is looking for what's next.... A lot of people are placing big bets on segmentation on money moving outside money market mutual funds. We'll talk about the success they've had to date, and also why they haven't had greater success. One of the big reasons has been that the yield advantage just hasn't been there to date, but now with the Fed moving this may change."

Our profile adds, "The MFU host commented on the overall growth of bond fund assets, 'Bond fund assets ... surpassed the level of money fund assets in 2010.... Bond fund assets have been on absolute tear. They currently total over $3.5 trillion. There's $425 billion in ETF assets, that aren't on there as well. So, the bond fund and ETF total is almost $4.0 trillion." Crane adds, "You have seen a couple of periods, the Taper Tantrum, in November just ahead of the Trump victory, you had some outflows, but the inflows came right back. Bond funds have been a juggernaut as far as the amount of money they've been getting."

A Bond Fund News brief on "Bond Fund Returns" explains, "Returns rose across most of the Crane BFI Indexes. Our BFI Total Index averaged a 1-month return of 0.49% and gained 3.90% over 12 months. The BFI 100 had a return of 0.49% in Jan. and rose 4.62% for the year. The BFI Conservative Ultra-Short Index returned 0.11% and was up 1.17% in '16; the BFI Ultra-Short Index had a 1-month return of 0.15% and 1.55% for the year. Our BFI Short-Term Index returned 0.35% and 2.74% for the month and year. The BFI High Yield Index increased 1.08% in Jan. and is up 14.83% in 2016."

Another brief, explains, "ICI's latest "Combined Estimated Long-Term Fund Flows and ETF Net Issuance" shows bond fund assets rising for the 5th week in a row. Bond funds had estimated inflows of $9.39 billion for the week, compared to estimated inflows of $8.16 billion during the previous week. Taxable bond funds saw estimated inflows of $8.52 billion, and municipal bond funds had estimated inflows of $878 million."

A sidebar entitled, "Thomson Reuters Lipper Flow Data," explains, "The net inflows for taxable bond funds were relatively evenly split between mutual funds (+$4.5 billion) and ETFs (+$3.0 billion). It was the sixth straight weekly net inflows for taxable bond mutual funds and the third straight for ETFs. For mutual funds the loan participation peer group once again led the way with net inflows of almost $750 million."

Finally, Morningstar recently featured an article entitled, "The Nominees for Fixed-Income Fund Manager of the Year," writing, "The two big bond stories of 2016 were the sharp reversal in the path of bond yields midyear and an impressive rally in corporates. [B]ond yields shifted down during the first part of 2016. By the 3rd quarter, though, bond yields were edging upward, a trend that accelerated following the election. The Fed hiked rates by 25 bps in mid-December, and most bond funds were in negative territory for the 4th quarter."

They add, "This year's nominees for Fixed-Income Fund Manager of the Year are as follows: Mary Ellen Stanek and Team, Baird Core Plus Bond (BCOIX); Fixed-Income Investment Policy Committee, Dodge & Cox Income (DODIX); Ford O'Neil and Team, Fidelity Total Bond (FTBFX); Ray Kennedy, Mark Hudoff, Patrick Meegan, and Richard Mak, Hotchkis & Wiley High Yield (HWHIX); Michael Hasenstab and Sonal Desai, Templeton Global Bond (TGBAX); Templeton Global Total Return (TTRZX), and Templeton Global Income."

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