The April issue of Crane Data's Bond Fund Intelligence, which was sent out to subscribers Friday, features the lead story, "Battle Brews Over Bond Fund Indexing; Record Inflow in Q1," which reviews some recent pro and con articles on active management vs. indexing. BFI also includes the article, "Bond Fund Symposium Highlights: Ultra-Shorts Big," which reviews our recent inaugural bond fund conference in Boston. In addition, we recap the latest Bond Fund News, including briefs such as, "Bond Fund Yields & Returns Higher in March." BFI also includes our Crane BFI Indexes, averages and summaries of major bond fund categories. We excerpt from the latest issue below. (Contact us if you'd like to see a copy of our latest Bond Fund Intelligence and BFI XLS data spreadsheet, and watch for news about our new Bond Fund Portfolio Holdings "beta" product next month.)

Our lead Bond Fund Intelligence story says, "The debate over indexing has shifted into the bond fund space recently with a study by PIMCO defending actively-managed bond funds, and a pair of recent news stories that support passive management. We review these below, and we also discuss the latest bond fund inflows, which we believe set a record in Q1'17."

It explains, "A new PIMCO paper, entitled, "Bonds Are Different: Active versus Passive Management in 12 Points," tells us, "Opinions in the active-passive investment debate have drifted poles apart over recent years. We revisit this discussion by contrasting equity and fixed income market in the U.S. We look at performance numbers and find that, unlike their stock counterparts, active bond mutual funds and exchange-traded funds (ETF's) have largely outperformed their passive peers after fees."

The story continues, "It explains, "We offer conjectures as to why bonds are different from stocks. This may be due to the large proportion of noneconomic bond investors, the benchmark rebalancing frequency and turnover, structural tilt in fixed income space, the wide range of financial derivatives available to active bond managers, and security-level credit research and new issue concessions."

Our "BFS Highlights" article says, "Crane Data recently hosted its first Bond Fund Symposium conference in Boston. The turnout and enthusiasm of attendees confirmed what we've suspected, that the ultra-, ultra short or 'conservative' ultra-short bond fund sector is one of the hottest and fastest-​growing in the mutual fund industry. We briefly review some of the highlights from the sessions and recent news on this growing segment below. (Note: This is an expanded and slightly different version of the update that ran in Money Fund Intelligence.)"

The piece continues, "Bond Fund Symposium's Keynote, 'The Time Is Now for Short-Term Strategies,' featured PIMCO's Jerome Schneider, who gave an excellent overview of the short-​term space and PIMCO's dramatic growth in this area. (See the chart on page 2. Assets in their ultra-shorts have increased from under $4 billion before the crisis to over $18 billion currently.) He urged attendees to redouble efforts to educate investors on the benefits of ultra-short bond funds."

It continues, "The next session, 'Segmenting the Ultra-Short Bond Market,' featured Crane Data's Peter Crane, with Fidelity Investments' Michael Morin and J.P. Morgan A.M.'s Dave Martucci. Crane commented, 'The short term bond fund space is pretty large overall, you're looking at about $400 billion roughly.' But ultra-short bond funds are just a quarter of this, and 'conservative' ultra-short a quarter of ultra-short. He added, 'There are [funds] near money funds, and there are short-term funds that are doing things that are alien to money market funds.... One of our decisions early on was to launch a 'Conservative Ultra-Short' category, to in effect slice the ultra-short in two, to make a segment that is more liquid, more suited to institutional investors."

The piece adds, "Morin said, 'This is all about investor education and making sure that they understand that these funds are not money market funds. The risk profile of the asset class is very different than money market funds, and it's imperative that we, as industry practitioners, make sure that clients know what they're buying. I think the worst thing that could happen for us in this emerging field of conservative ultra-short bond funds is clients really [not] understanding ... them." (Note: Conference recordings, PPTs and the conference binder are available to attendees and subscribers here or at the bottom of our "Content" page.)

Our Bond Fund News brief on "Yields & Returns" explains, "Returns rose across all of the Crane BFI Indexes except High Yield last month, and yields moved higher for all of our averages. The BFI Total Index averaged a 1-month return of 0.12% and gained 2.98% over 12 months. The BFI 100 had a return of 0.07% in March and rose 3.63% over 1 year. The BFI Conservative Ultra-Short Index returned 0.09% and was up 1.18% over 1-year; the BFI Ultra-Short Index had a 1-month return of 0.11% and 1.62% for 12 mos. Our BFI Short-Term Index returned 0.16% and 2.27% for the month and past year. The BFI High Yield Index decreased 0.04% in March but is up 11.97% over 1 year."

Another brief, "Morningstar writes "Bond Funds Hold Their Own in the First Quarter." The article says, "The bond markets enjoyed a relatively benign opening to 2017, with many fixed-income funds enjoying modest gains after a rocky fourth quarter of 2016. Although the Fed hiked rates for only the second time in more than 10 years, all fixed-income Morningstar Categories were in positive territory over the first quarter.... The riskiest bonds outperformed sharply, with particularly strong performances coming from funds in the emerging-markets bond and emerging-markets local-currency bond categories."

Finally, a sidebar entitled, "PIMCO Biggest BF Again," explains, "The Wall Street Journal writes, "A Pimco Fund Just Became the Biggest Active Bond Fund, and It Wasn't Bill Gross's." This piece explains, "A Pacific Investment Management Co. fund is once again the largest of its kind in the world. For the first time, the bond manager claimed the crown without any help from co-founder Bill Gross. Pimco's Income Fund surpassed TCW Group Inc.'s Metropolitan West Total Return Bond Fund in March as the biggest actively managed bond fund, according to figures released Tuesday."

Email This Article

Use a comma or a semicolon to separate

captcha image