The February issue of our Bond Fund Intelligence, which was sent out to subscribers Thursday morning, features the lead story, "Crane, JPMAM's Junker on Ultrashort BFs at University," which features comments from our recent Money Fund University on ultra-shorts, and the profile, "SEI Investments' Simko Talks About Total Return," our latest Portfolio Manager interview. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show lower bond fund yields, but higher returns in January. We excerpt from the new issue below. (Contact us if you'd like to see our Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data. Also, register soon for our 3rd annual Bond Fund Symposium, March 25-26, 2019 in Philadelphia.)
The lead BFI story features a discussion featuring Cecilia Junker of J.P. Morgan Asset Management at the recent Crane's Money Fund University conference. Junker says, "Ultra-short can mean a lot of things.... For us [at JPM], it's just generally a max duration of one year. But we'll invest out to a duration of, let's say, 1.5 [years]. So, duration does pretty much define it."
She continues, "We really have the goal of being a low volatility and a safe-haven asset class.... We actually have the same investing process, the same philosophy, the same approved-for-purchase list as our money-fund group. Obviously, there are some names that we can buy because we can go down in credit a little bit."
Our "Fund Profile" says, "This month, BFI interviews Sean Simko, managing director and head of Global Fixed Income Management at SEI Investments. He discusses SEI's separately-managed account options, and forecasts that the Fed will likely not make any further upward moves in short-term interest rates this year."
BFI asks Simko, "How long has SEI been involved in running (short-term) bond funds?" He answers, "SEI has been offering short-term bond funds since the launch of the SDIT Short-Duration Government Fund in February of 1987."
We also ask him to, "Tell us about the Real Return Bond Fund. He responds, "Tim Sauermelch, CFA, and I have co-managed the Real Return Bond Fund since 2013. The fund strives to protect investors’ purchasing power against inflation. The strategy is implemented primarily through the use of Treasury Inflation-Protected Securities. This fund could be viewed as a staple in an investment portfolio that is looking to receive inflation protection." (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 Plunge, Returns Jump in Jan." It explains, "Bond fund yields fell for all categories but Ultra-Shorts. The BFI Total Index returned 1.39% for 1-month and 1.59% over 12 months. The BFI 100 returned 1.47% in January and 1.97% over 1 year. The BFI Conservative Ultra-Short Index returned 0.31% over 1 month and 2.08% over 1-year; the BFI Ultra-Short Index averaged 0.51% in Jan. and 1.78% over 12 mos. Our BFI Short-Term returned 0.87% and 1.81%, and BFI Intm-Term Index returned 1.29% and 1.71% for 1-mo and 1-year. BFI's Long-Term Index returned 1.63% in Jan. and 1.14% for 1-yr; BFI's High Yield Index returned 3.63% in Jan. and 0.86% over 1-yr.
Another brief, "WSJ on Active vs. Passive Bond Funds," tells us, "The article, 'Active Funds Are Winning (in Bonds, That Is),' argues, 'Actively managed open-end bond mutual funds and exchange-traded funds have done better than merely following an index."
A News update titled, "Federated's Q4 Earnings Call Talks Bond Funds," observes, "The top-selling fixed-income funds ... included Federated Ultrashort Bond Fund, Federated Municipal Ultrashort Fund, Federated Short-Term Income Fund, Federated Government Ultrashort Duration Fund and Federated Real Return Bond Fund." CEO Chris Donahue says, "We saw fund inflows in ultra-short and other short duration products offset by outflows in high yield and other."
A fourth News brief, "Financial Advisor Magazine writes 'Ultra-Short Bond Funds Satisfy Multiple Challenges'" notes, "Financial advisors are embracing ultra-short bond funds to help clients eke out more yield in a rising interest rate environment plagued with multiple uncertainties."
Finally, a sidebar entitled, "Fitch Worries About BFs," concerns a Fitch Ratings' paper, "The Coming Storm: Bond Funds' Potential Impacts on Financial Stability," which tells us, "Regulators are increasingly focused on open-ended bond funds as a potential source of financial instability. The growth of the bond market, fed by central bank quantitative easing (QE) and tighter bank regulation, has fueled a surge in open-ended mutual funds, accompanied by increasing liquidity mismatches and growing credit and duration risks."
