The August issue of our Bond Fund Intelligence, which was sent out to subscribers Tuesday, features the lead story, "Bond Fund Inflows Continue as ETFs Now 1/8th of Market," which reviews how bond funds keep attracting assets even as returns weaken, and the profile, "Northern High Yield Fund's Camden Avoids the Blowups," which interview Brad Camden of Northern Trust Asset Management. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields and returns moved higher last month. 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 details soon on our 3rd annual Bond Fund Symposium conference, which will be March 25-26, 2019 in Philadelphia.)
Our lead BFI story says, "Investors continue pouring money into bond funds, even as rates grind their way higher. While ETFs keep getting the lion's share of new money, the flows show no signs of stopping. Bond fund assets and ETFs combined have seen inflows for 19 straight months now. We look at the most recent flows and asset totals below."
It tells us, "ICI's latest 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance,' with data as of Aug. 1, 2018, says, 'Bond funds had estimated inflows of $5.86 billion for the week, compared to estimated inflows of $4.42 billion during the previous week. Taxable bond funds saw estimated inflows of $5.69 billion, and municipal bond funds had estimated inflows of $164 million.' Over the past 5 weeks through 8/1/18, bond funds and bond ETFs have seen inflows of $31.0 billion."
Our lead BFI piece adds, "The latest 'Trends in Mutual Fund Investing - June 2018' shows bond fund assets increasing $8.2 billion to $4.112 trillion. Over the 12 months through 6/30/18, bond fund assets have increased by $225.7 billion, or 5.8%. The number of bond funds remained unchanged last month at 2,124. This was down 41 from a year ago."
Our "profile" on article reads, "This month, Bond Fund Intelligence speaks with Brad Camden, Director of Fixed Income Strategy at Northern Trust Asset Management. Camden oversees the $3.7 billion Northern High Yield Fixed Income Fund, among others, and gives us an update on the high yield bond fund market. With high yield, he says, 'It's all about avoiding the blowups.' Our discussion follows."
BFI asks, "Give us a little history." Camden tells us, "Northern Trust Asset Management has been managing bond funds for decades. The Northern High Yield Fixed Income Fund (NHFIX) was launched in 1998. This year will mark its 20th anniversary, during which time we're most proud of its strong, consistent performance, including largely avoiding problem investments. Overall, the high yield fund is part of our broader fixed income management capabilities. We have about $5 billion of assets under management in dedicated high yield strategies."
He adds, "I joined Northern Trust Asset Management in 2002, and I joined fixed income in 2005. I've been part of the high yield fund and strategy team in a variety of capacities since 2005, and I was named a co-PM in 2016."
BFI also says, "It's been a good run for high yield." Camden responds, "It's been a great stretch. High yield returns have been outstanding, just like most risk asset returns have been. Since the crisis, we've seen strong and stable returns in the high yield market with [some] exceptions ... for example, the commodity credit cycle of late 2014 thru February 2016. More recently, we saw very strong returns in 2016, a nice return in 2017, and the index is up about 1.6 percent so far YTD. Performance has been strong despite investor concerns regarding tight valuations, market liquidity, and an aging credit cycle." (Watch for more excerpts from this article later this month, or see the latest issue of BFI.)
A Bond Fund News brief, entitled, "Yields and Returns Up Again in July," tells us, "Bond fund yields and returns moved higher last month across all categories. The BFI Total Index averaged a 1-month return of 0.32% and the 12-month gain was 0.63%. The BFI 100 returned 0.28% in July and 0.49% over 1 year. The BFI Conservative Ultra-Short Index returned 0.27% over 1 month and 1.48% over 1-year; the BFI Ultra-Short Index averaged 0.28% in July and 1.25% over 12 mos. Our BFI Short-Term Index returned 0.17% and 0.44%, and our BFI Intm-Term Index returned 0.11% and -0.39% for the month and year. BFI's Long-Term Index returned 0.24% in July and -0.50% for 1 year; BFI's High Yield Index returned 0.83% in July and 2.27% over a year."
Another brief, "New AB Short Duration Income Fund," explains, "Citywire says, 'AllianceBernstein is launching a new short duration bond fund, Securities and Exchange Commission (SEC) filings show. The new fund, called the AB Short Duration Income fund, will devote at least 65% of its assets to US and foreign government-backed securities, and up to 35% of its assets to junk bonds, according to a prospectus. Scott DiMaggio, Gershon Distenfeld, Douglas Peebles and Matthew S. Sheridan will comanage the fund. Class A shares of the fund will carry a 0.65% expense ratio."
A third News brief comments, "PGIM Launches Junk Bond ETF," says, "ETF.com published, 'New Junk Bond ETF Planned,' which tells us, 'A recent filing from Prudential Investment Management outlines plans for the insurance giant's next ETF. The PGIM Active High Yield Bond ETF is slated to list on the NYSE Arca, and will be actively managed. The fund will target junk bonds issued by both corporations and governments.... PGIM has gotten its feet wet with the launch of the PGIM Ultra Short Bond ETF (PULS) in April. The fund now has $35 million in assets under management. The high-yield -debt space is a popular target for actively managed ETFs, with 12 funds competing in that category.' (See the PGIM 'profile' in our August Money Fund Intelligence too.)"
Finally, a sidebar on the new "Vanguard Global Credit Bond Fund," explains, "A press release entitled, 'Vanguard Continues To Expand Active Fixed Income Offerings With Proposed Global Credit Bond Fund,' tells us, 'Vanguard ... filed a preliminary registration statement with the Securities and Exchange Commission for Vanguard Global Credit Bond Fund. The new actively managed fund, expected to launch in November 2018, will provide investors with diversified, predominately investment-grade exposure to the U.S. and international credit markets.'"
