The April issue of our Bond Fund Intelligence, which was sent out to subscribers Friday morning, features the lead story, "Bond Fund Symposium Focus on Ultra-Shorts, Flows, ESG," which recaps our recent ultra-short bond fund conference, and the profile, "Osterweis Total Return's Vataru Stays Flexible," 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 and higher returns again in March. 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.)
Our lead story says, "Crane's Bond Fund Symposium, our event focusing on the 'enhanced cash' and ultra-short bond fund space, took place last month in Philadelphia, and the buzz told us that the party is still going strong in this sector of the marketplace. We quote from several of the BFS sessions below. (Next year's show is scheduled for March 23-24, 2020, in Boston, Mass.) See our latest Money Fund Intelligence newsletter and recent Crane Data News for more too."
It continues, "Our 'State of the Bond Fund Marketplace' introduction featured ICI's Shelly Antoniewicz. She commented on the massive inflows bond funds have seen, 'No matter what was going on with bond returns, we feel that there is a very large demographic reason for why we have seen these sustained inflows to bond funds. We expect that continue and boost bond fund flows.'
She added, "We have this very large baby boom generation; they hold half of mutual fund assets. That's a lot of money, long term mutual fund assets right now, around $17 trillion. [T]hey're ... going to be moving from equity to fixed income because they're looking for an asset class that historically has lower volatility and is going to throw off an income stream in retirement."
Our "Fund Profile" says, "This month, BFI interviews Eddy Vataru, Portfolio Manager of the Osterweis Total Return Fund. We talk with the San Francisco based bond fund manager about his fund, which focuses on 'picking securities, rotating sectors and hedging duration.' We also discuss a number of other issues in the fixed-income market. Our Q&A follows."
BFI asks Vataru to "Give us a little bit of background." He responds, "Osterweis was founded in 1983. We launched our first fixed income fund in 2002, the Osterweis Strategic Income Fund, which was among the earliest unconstrained funds.... Carl Kaufman started the fund and still manages it today. The firm decided to launch the Total Return fund because it really needed an investment grade analog to the Strategic Income Fund -- something with same kind of DNA but focused only on the investment grade market. It uses a different toolkit, but the aim is the same: to have a benchmark agnostic, absolute return strategy with lower volatility."
Vataru continues, "I joined Osterweis 2 1/2 years ago.... Here I'm not required to run money using a specific style. I wanted a little more freedom to run money the way I think it should be run, and Osterweis has always been skeptical of the style matrix, so it's been a great fit. We call it the common-sense approach to managing money."
Our Bond Fund News includes the brief "Yields Lower, Returns Jump in March." It explains, "Bond fund yields were lower for most categories except Ultra-Shorts and Intm. The BFI Total Index returned 1.16% for 1-month and 3.48% over 12 months. The BFI 100 returned 1.32% in March and 3.99% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.35% over 1 month and 2.35% over 1-year; the BFI Ultra-Short Index averaged 0.40% in March and 2.19% over 12 mos. BFI Short-Term returned 0.72% and 2.90%, and BFI Intm-Term Index returned 1.57% and 3.85% for 1-mo and 1-year. BFI's Long-Term Index returned 2.30% in March and 4.36% for 1-yr; our High Yield Index returned 0.66% in March, 4.18% over 1-yr."
Another News brief, "ICI Says Bond Fund Expense Ratios Flat," says, "A press release explains, 'In 2018, the average expense ratio of actively managed ... bond mutual funds fell to 0.55 percent in 2018, from 0.56 percent in 2017. Over the same period, the average expense ratios for index ... bond mutual funds remained unchanged at ... 0.07 percent.' ICI's 'Trends in the Expenses and Fees of Funds, 2018,' adds, 'After falling for four consecutive years, the asset-weighted average expense ratio for bond mutual funds remained unchanged in 2018, at 0.48 percent.'"
A third News update, "InvestmentNews Says '`Morningstar Improving Bond Fund Data Reporting,' says, 'Morningstar Inc. is changing up the way it reports fixed-income data for investors and financial advisers. The switch relates to how Morningstar ... reports important fixed-income metrics such as duration and credit quality. Morningstar currently relies on the data that are self-reported by asset managers, but it will start calculating the data internally as of July 31 for all fixed-income funds.'"
A fourth News brief, "Investments in bond-based ETFs head for $1tn landmark,'" says, "Exchange traded funds linked to bond markets are marching inexorably towards the $1tn mark. A key milestone in the development of fixed income ETFs. Despite this growth, fixed income ETFs currently account for a tiny share -- less than 1 per cent -- of the value of outstanding bonds globally. Adoption rates, however, are rising rapidly. Greenwich Associates ... surveyed a sample of US institutional investors in late 2018 and found that 60% used bond ETFs, up from 20% as recently in 2017."
Finally, a sidebar entitled, "World BF Assets Flat," explains, "Bond fund assets worldwide fell sharply in the latest quarter but remained above the $10 trillion level. U.S. and European bond funds fell sharply in Q4'18, but Asian BFs rose, according to the Investment Company Institute's 'Worldwide Open-End Fund Assets and Flows, Fourth Quarter 2018.' ICI's report shows assets plunged $117.2 billion, or -1.1%, to $10.136 trillion in the 4th quarter. Bond funds represent 21.7% of the $46.70 trillion in worldwide mutual fund assets. Global bond fund assets have declined by $237.6 billion, or -2.3%, over 12 months."
