The July issue of our Bond Fund Intelligence, which was sent out to subscribers Monday morning, features the lead story, "Worldwide Bond Fund Assets Keep Growing in Q1; China," which reviews the latest bond fund totals from other countries, and the profile, "Martucci, Morin & Yi Talk Ultra-Shorts at Symposium," which reviews comments from a session on ultra-short bond funds from Crane Data's recent Pittsburgh conference. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that most bond fund category yields and returns inched higher last month (except Long-Term, High-Yield and Global). We excerpt from the latest issue below. (Contact us if you'd like to see a copy of Bond Fund Intelligence and our BFI XLS spreadsheet "complement," and watch for our next Bond Fund Portfolio Holdings data set to be sent out next Monday, 8/21.)

Our lead BFI story says, "The Investment Company Institute released its "Worldwide Regulated Open-Fund Assets and Flows First Quarter 2018" late last month, and the latest data collection on mutual funds in other countries (as well as in the U.​S.) shows that global bond fund assets rose by $174.3 billion, or 1.7%, to $10.547 trillion in Q1'18. This was led by jumps in bond funds domiciled in China, the U.S., Luxembourg, Ireland and France. Worldwide bond fund assets, which broke over the $10 trillion level in Q4'17, have increased by $1.198 trillion, or 12.8%, the past 12 months."

It tells us, "Over 12 months, the US, Luxembourg, and Ireland showed the largest increases in bond fund assets. France, the U.K. and China also showed big gains. India, The Netherlands, Japan and Canada saw declines in the past quarter, while Australia, Korea and Japan were the only asset losers over the past year."

ICI's release says, "On a US dollar–denominated basis ... bond fund assets increased by 1.7 percent to $10.55 trillion in the first quarter. Balanced/mixed fund assets increased by 0.8 percent to $6.47 trillion in the first quarter, while money market fund assets increased by 3.4 percent globally to $6.10 trillion."

They write, "At the end of the first quarter of 2018 ... the asset share of bond funds was 21 percent and the asset share of balanced/mixed funds was 13 percent. Money market fund assets represented 12 percent of the worldwide total.... Globally, bond funds posted an inflow of $147 billion in the first quarter of 2018, after recording an inflow of $162 billion in the fourth quarter."

Our "profile" article says, "This month, Bond Fund Intelligence excerpts from a session entitled, "Ultra-Short Bond Funds, SMAs & Alt-Cash" at our recent Money Fund Symposium conference. The segment featured Dave Martucci of J.P. Morgan Asset Management, Michael Morin of Fidelity Investments, and Peter Yi from Northern Trust Asset Management. The three discuss segmenting cash, the various shades of ultra-short, and separately managed accounts. Highlights of the Q&A follow."

Martucci says, "We want to make sure our clients know what they're getting, that these are different animals. It's not just interest rate risk, but you also have spread duration risk. Clients typically want to restrict some kind of investments.... More clients are willing to go down in credit to get diversity away from the financial space ... and have gotten comfortable with the SMA space.... Much of the portfolios, say 30-40%, are invested in typical money market instruments, CP, CDs, repo, etc."

Yi comments, "I will offer two perspectives here. First, to Dave's point, the ultra-short space has largely been SMAs from our perspective until probably about ten years ago. We've been managing ultra-short, sometimes called enhanced cash or cash strategies ... since the late '70s and we launched our first two ultra-short mutual funds in 2009."

He continues, "It has been a really big success story for us, we have grown our assets really exponentially since then. Our two mutual funds that are now represent about $6B in assets.... Now things are starting to move from that customized, SMA structure to a more standardized mutual fund structure. We are now starting to see peer groups develop.... So it makes it easier to compare funds."

A Bond Fund News brief, entitled, "Yields and Returns Mostly Up in June," tells us, "Bond fund yields and returns moved higher last month for most categories, except Long-Term, High-Yield and Global. The BFI Total Index averaged a 1-month return of 0.01% and the 12-month gain was 0.86%. The BFI 100 returned 0.07% in June and 0.77% over 1 year. The BFI Conservative Ultra-Short Index returned 0.16% over 1 month and 1.49% over 1-year; the BFI Ultra-Short Index averaged 0.09% in June and 1.16% over 12 mos. Our BFI Short-Term Index returned 0.04% and 0.62%, and our BFI Intm-Term Index returned -0.02% and 0.02% for the month and year. BFI's Long-Term Index returned -0.08% in June and -0.22% for 1 yr; BFI's High Yield Index returned 0.15% in June and 2.26% over 1 year."

Another new brief, "Barron's Writes 'Bolster Your Bond Portfolio,' explains, "[I]investors can't be blamed for wondering whether it's worth investing in bonds at all, now that they're finding negative returns across the market: Investment-grade corporate bonds are down 4.9% this year, including interest payments, which puts them on track for their worst calendar-year performance since 1974, according to Bank of America Merrill Lynch.... So what are investors to do in today's high-risk, low-return environment? ... Investors can sidestep losses by sticking with high-grade, short-term funds, and have a better shot at gains in attractive areas such as floating-rate corporate loans and high-yield municipal bonds."

Finally, a sidebar entitled, "Bond Fund Flows Slowing, says, "ICI's latest 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance' with data as of July 3, 2018, says, 'Bond funds had estimated inflows of $4.59 billion for the week, compared to estimated inflows of $2.98 billion during the previous week. Taxable bond funds saw estimated inflows of $4.23 billion, and municipal bond funds had estimated inflows of $356 million.' Over the past 5 weeks through 7/3/18, bond funds and bond ETFs have seen inflows of $19.1 billion."

It adds, "The ICI's latest 'Trends in Mutual Fund Investing - May 2018' shows bond fund assets increasing $19.5 billion to $4.104 trillion. Over the 12 months through 5/31/18, bond fund assets have increased by $235.0 billion, or 6.1%. The number of bond funds decreased by 9 to 2,124. This was down 47 from a year ago."

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