The August issue of Crane Data's Bond Fund Intelligence, which was sent out to subscribers Monday, features the lead story, "Fidelity Joins Index Fund Fee Wars; Short Term Bond Index," which reviews recent fee reductions and fund launched in bond index funds. BFI also includes the "profile" article, "J.P. Morgan A.M.'s Martucci: Ultra-Short Outlook Bright," with J.P. Morgan Asset Management Managing Director & Portfolio Manager Dave Martucci. In addition, we recap the latest Bond Fund News, which includes briefs on lower yields but higher returns in July, continued inflows and more. BFI also includes our Crane BFI Indexes, averages and summaries of major bond fund categories. We excerpt from the August 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 our latest Bond Fund Portfolio Holdings data next week.)
Our lead Bond Fund Intelligence story says, "The battle for bond index fund assets just became more intense. Fidelity recently cut expenses on a host of index funds, and they've also filed to launch a new Short-Term Bond Index Fund. We review these moves, and changes Vanguard is making to three of its Government Bond Index funds, below."
It continues, "A press release, "Fidelity Brings Even Greater Value to Index Investors," subtitled, "Fidelity Cuts Expenses on 14 Index Mutual Funds," tells us, "Fidelity Investments ... announced that effective August 1, 2017 it will reduce total expenses on 14 of its stock and bond index mutual funds. With this action, 100% of Fidelity's stock and bond index mutual funds and sector ETFs will have total net expenses lower than their comparable Vanguard fund."
BFI adds, "Fidelity's Colby Penzone comments, "For index investors focused on cost, there's no need to look further than Fidelity. Already one of the industry's lowest cost index fund providers, we now offer an even better value.... We believe we have an index value proposition unsurpassed in our industry.... [W]e believe Fidelity provides the best customer experience and value in the industry."
Our latest profile says, "This month, Bond Fund Intelligence again talks again with J.P. Morgan Asset Management Managing Director & Portfolio Manager Dave Martucci. (See too our March 2015 article "JPM's Martucci & Rehman: Defining Conservative Ultra Short.") Martucci oversees over $65 billion in separately managed accounts and conservative ultra-short funds. We discuss the state of the ultra-short market, the Managed Reserves strategy, and a number of issues in the bond space. Our Q&A follows."
BFI says, "Give us some history." Martucci responds, "Here at J.P. Morgan Asset Management, we've been managing liquidity or ultra-short type investments for over 30 years. I've been in the business for 17 years, managing ultra-short all the way out to intermediate-type funds. But over the past 10 years, I've really focused on the ultra-short space. Our current offering in the ultra-short space is what we have branded, the Managed Reserves product."
He explains, "The Managed Reserves Strategy is ... made up of 155 different entities that we manage money for, including the 4 conservative ultra-short funds. We also manage an ETF called the JP Morgan Ultra-Short Income ETF that was launched in May 2017. All of the funds are co-mingled vehicles, which total $12.8 billion, and another $50+ billion is from separately managed accounts."
BFI asks, "What are the other funds?" He responds, "The JP Morgan Managed Income Fund is our flagship fund at $9.2 billion and has an inception date of September 30, 2010. We also have two Luxembourg-based funds; JP Morgan Managed Reserves Fund and the JP Morgan Sterling Managed Reserves Fund, and one Switzerland-based fund; JP Morgan Swiss Managed Reserves Fund. These funds make up $3.6 billion. Of the $65 billion that I mentioned, around roughly $2 billion US dollar equivalent is Sterling and Euro denominated separately managed accounts." (Watch for more excerpts of this article later this month, or ask us to see the full issue of BFI.)
Our Bond Fund News includes a brief entitled, "Yields Higher; Returns Mixed in July." It says, "Yields dipped across most of our Crane BFI Indexes last month, but returns were higher for most major sectors. The BFI Total Index averaged a 1-month return of 0.52% and gained 1.87% over 12 months. The BFI 100 had a return of 0.54% in July and rose 2.36% over 1 year. The BFI Conservative Ultra-Short Index returned 0.14% and was up 1.17% over 1-year; the BFI Ultra-Short Index had a 1-month return of 0.13% and 1.58% for 12 mos. Our BFI Short-Term Index returned 0.29% and 1.63% for the month and past year. The BFI High Yield Index increased 1.01% in July and is up 8.59% over 1 year. (See p. 6+ or BFI XLS for more returns.)
The new issue also includes a News brief entitled, "Investment News: "Vanguard Winning at Bond Inflows, Too." The article explains, "Most people know that Vanguard has been vacuuming up stock assets faster than an elephant in a peanut warehouse. But what company is leading in scooping up bond-fund assets? That would be Vanguard. Of the 30 top-selling taxable bond mutual funds and exchange-traded funds in the Morningstar database, 10 are Vanguard funds. Altogether, they have seen estimated net flows of $113 billion in the past 12 months, or 49% of the total net inflows to the 30 best-selling funds and ETFs. The top-selling Vanguard bond fund, Vanguard Total Bond Market II Index Fund (VTBIX), saw net inflows of $28.9 billion in the past 12 months, according to Morningstar estimates."
Finally, the August issue of BFI also includes a sidebar, "Big Bond Inflows Continue." It says, "The ICI's latest "Combined Estimated Long-Term Fund Flows and ETF Net Issuance" tells us, "Bond funds had estimated inflows of $7.01 billion for the week, compared to estimated inflows of $6.37 billion during the previous week. Taxable bond funds saw estimated inflows of $6.11 billion, and municipal bond funds had estimated inflows of $899 million." Over the past 5 weeks through August 2, bond funds and ETFs have seen almost $38.0 billion in inflows."
