The October issue of our Bond Fund Intelligence, which was sent out to subscribers Monday morning, features the lead story, "Worldwide Bond Fund Assets Plunge in Q2; Europe Down," which reviews bond fund assets in other countries, and the profile, "Rothweiler & Cameron on New UBS Ultra Short Income," which interviews UBS Asset Management's David Rothweiler and Tom Cameron. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields inched up in September while returns were mixed. We excerpt from the latest issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, and ask us about our 3rd annual Bond Fund Symposium, which will take place March 25-26, 2019 in Philadelphia.)
The lead BFI story says, "The Investment Company Institute released its 'Worldwide Regulated Open-Fund Assets and Flows Second Quarter 2018' late last month, and the most recent data collection on mutual funds in other countries shows that global bond fund assets fell $293.8 billion, or -2.8%, to $10.254 trillion in Q2'18. The declines were led by bond funds domiciled in Luxembourg, Ireland, Brazil, and Germany. Worldwide bond fund assets, which broke $10 trillion in Q4'17, have increased by $477.7 billion, or 4.9%, the past 12 months."
It continues, "Over 12 months, the U.S., Luxembourg, and Ireland showed the largest increases in bond fund assets. Germany, France, and the U.K. also showed big gains. France, The Netherlands, Canada, and Switzerland saw declines in Q2, while The Netherlands, Korea, and India had asset losers over the past year."
The piece adds, "According to Crane Data's analysis of ICI's 'Worldwide' data, the U.S. remained the largest bond fund market in Q2'18 with $4.702 trillion, or 45.9% of the total. U.S. bond fund assets increased by $46.0 billion in Q2'18 (1.0%) and increased by $314.7B (7.2%) in the 12 months through July 31, 2018. Luxembourg remained in second place among countries overall. Luxembourg saw assets decrease $91.5 billion (down -6.1%) in Q2 to $1.419 trillion (13.8% of worldwide). Luxembourg assets increased $58.7 billion (4.3%) over 12 months."
Our UBS "profile" says, "This month, Bond Fund Intelligence speaks with UBS Asset Management's David Rothweiler, US Fixed Income Portfolio Manager, and Thomas Cameron, Executive Director on the Global Liquidity Management team, about the recent launch of the UBS Ultra Short Income Fund. The fund, the latest entry in the growing category of Conservative Ultra-Short Bond Funds, has grown to over $1 billion in just over 4 months since its launch. Our Q&A follows."
BFI says, "Tell us about your history. Rothweiler responds, "UBS has a history of managing a wide range of global fixed income assets, and our domestic money fund complex goes back four decades to 1978. We've been running short duration SMAs about as long, and presently, our short duration strategies have a significant presence globally at the firm. I've been in fixed income for over 20 years, and I've been part of the liquidity management team at UBS Asset Management for almost 15 years. In that time, I've traded and managed a wide range of fixed income assets including intermediate accounts, 2a-7 funds, and ultrashort strategies." Cameron adds, "This January, I will celebrate 18 years at UBS. I've been fortunate to work with Dave and Rob Sabatino and his PM team the entire time."
BFI also comments, "Tell us about Ultra Short Income." Rothweiler responds, "UBS Asset Management has a broad range of fixed income products, and over the years we have experienced steady demand in our ultrashort duration separate account strategy. Recently we have seen demand coming from both ends of the curve. Clients with stable cash have sought additional yield vs MMFs without going too far out the curve. From the long end, we have seen demand from clients seeking to shorten duration and reduce principal risk as we enter a period of expected rising rates. With the Fed steadily raising the overnight rate, Treasury and credit curves have continued to flatten out and investors are finding the Ultra Short Income Fund's current yield attractive given it is not that far off from a 10-year Treasury." (Watch for more excerpts from this article later this month, or see the latest issue of BFI.)
Our Bond Fund News includes the brief, "Yields Inch Up; Returns Mixed in Sept." It explains, "Bond fund yields inched higher in the past month and returns were lower for all but Short-Term, High Yield and Global. The BFI Total Index averaged a 1-month return of -0.15% and the 12-month gain was 0.31%. The BFI 100 returned -0.21% in September and 0.17% over 1 year. The BFI Conservative Ultra-Short Index returned 0.12% over 1 month and 1.73% over 1-year; the BFI Ultra-Short Index averaged 0.17% in Sept. and 1.35% over 12 mos. Our BFI Short-Term Index returned 0.03% and 0.51%, and our BFI Intm-Term Index returned -0.47% and -0.82% for the 1-mo and year. BFI's Long-Term Index returned -0.54% in Sept. and -1.04% for 1yr; BFI's High Yield Index returned 0.44% in Sept. and 2.55% over 1-yr."
Another brief, entitled, "CNBC Says 'Short-term bond funds stage a comeback,'" explains, "After years of neglect as investors chased higher returns elsewhere or simply left money parked in cash, short-term bond funds are increasingly gaining attention from those looking for a safe investment with some return."
A third News brief, "Morningstar on PIMCO Short-Term," tells readers, "In 'This Terrific Ultrashort Bond Fund Leaves No Stone Unturned,' they explain, 'PIMCO Short-Term's wide-ranging strategy makes full use of the team's global fixed-income expertise. While its approach comes with risk, the fund's skilled manager never loses sight of its modest goals -- protecting capital chief among them.... Jerome Schneider has called the shots here since 2011.'"
Finally, a sidebar entitled, "Is the Bond Party Over?" explains, "While September wasn't bad, it seems as if bond funds could see their first month of big losses and steep outflows in years this October. Though markets have stabilized, we'll see if losses resume and outflows follow in the coming weeks.... The Financial Times released an article entitled 'Biggest bond ETF suffers record withdrawals,' which tells us, 'The biggest exchange-traded bond fund has suffered a record one-day withdrawal, after the global fixed-income market saw more than $900bn evaporate in last week's Treasury-led bond rout.'"
