The November issue of our Bond Fund Intelligence, which was sent out to subscribers Friday morning, features the lead story, "Bond Fund Inflows Stay Hot; ETF Flows on Record Pace," which looks at the continued strong inflows into bond funds, and "PIMCO's MINT Turns 10: Schneider & Chambers Talk," which interviews PIMCO's Jerome Schneider and Ken Chambers. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show bond fund yields were down while returns rebounded in October. 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 "Bond Fund Inflows" article says, "Bond fund inflows continued at a feverish pace in the latest month. While fund flows in 2019 aren't quite as strong as those in 2017 and the first half of 2018, they are close. Bond ETFs have gotten even hotter, though, and it looks like they'll have a record year of inflows."
It continues, "ICI's most recent weekly 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance,' with data as of Nov. 6, says, 'Bond funds had estimated inflows of $12.67 billion for the week, compared to estimated inflows of $11.28 billion during the previous week. Taxable bond funds saw estimated inflows of $10.48 billion, and municipal bond funds had estimated inflows of $2.18 billion.' Over the past 5 weeks, bond funds and bond ETFs have seen inflows of $50.6 billion."
Our "PIMCO MINT" article comments, "This weekend, PIMCO will celebrate the 10th birthday of MINT, or PIMCO Enhanced Short Maturity Active ETF, the oldest and largest actively-managed fixed-income exchange traded fund. We discuss the origin and current state of the short-term bond ETF and marketplace with PIMCO MD & Portfolio Manager Jerome Schneider and Product Specialist Ken Chambers. Our Q&A follows."
BFI says, "Tell us briefly about your history." Schneider answers, "PIMCO is approaching 50 years, and a focus on active bond management and fixed income has been the key to our success. We take into account macro-economic trends and utilize our resources to identify bottom-up opportunities for clients.... In 1987, we created the PIMCO Short Term Fund.... We've been at the forefront of creation of value for clients who want to identify a more neutral risk opportunity [and] take advantage of structural situations in the front end of the yield curve."
He continues, "Over the past 10 years, we've been adapting and segmenting that short-term opportunity set on two fronts. [We've been] building out our expertise and growing our portfolio management team. We're up to 12 PMs in the front end.... [We've also expanded] in terms of the products we've offered and created. [We have] not only separate accounts, as you might figure for institutional clients, but a large set of client friendly and accessible venues which are focused on the front end."
Our Bond Fund News includes the brief, "Yields Down, Returns Up in October," which says, "Bond fund yields fell and returns rebounded last month. Our BFI Total Index returned 0.21% over 1-month and 7.55% over 12 months. The BFI 100 returned 0.24% in Oct. and 8.56% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.22% over 1-mo and 2.80% over 1-yr; Ultra-Shorts averaged 0.19% in Oct. and 2.98% over 12 mos. Short-Term returned 0.29% and 5.07%, and Intm-Term gained 0.30% last month and rose 9.81% over 1-year. BFI's Long-Term Index returned 0.24% in Oct. and 13.26% for 1-yr; our High Yield Index returned 0.14% in Oct. and 6.69% over 1-year.
In another News brief, we quote a Barron’s piece, 'Bond Funds Are Feeling the Pain. There's an Exception at Pimco." It says, "The recent fixed-income selloff means large bond funds have posted losses in November. That might surprise investors who have seen healthy gains from bonds for most of the year."
A third News update covers BlackRock's blog, "Reaching for yield? Be aware of what lies beneath." They explains, "Three quarters into 2019, stock and bond performance seems to be telling a story of relative calm. Scratch the surface, however, and underlying market movements complicate the narrative. In particular, a trend toward quality suggests that investors are more concerned than they first appear."
BFI features a sidebar entitled "BlackRock's Fink on ETFs." This article says, "BlackRock CEO Laurence Fink discussed bond ETFs on the company's latest earnings call. He comments, 'Demand remains exceptionally strong for fixed-income ETFs, where iShares is the market leader. We captured $24 billion of net inflows in the quarter and a record $87 billion already year-to-date as client demand for fixed-income exposures accelerated.... Fixed-income ETFs have also been utilized by more and more fixed-income investors for active purposes, using ETFs as a mechanism to get active returns.... Fixed-income ETFs are a technology that is accelerating and will definitely modernize the global bond market.'"
Finally, another sidebar, "Study Hits Morningstar," tells us, "MarketWatch's article, 'Bond mutual funds may hold risker holdings than reported, NBER study finds,' explains, 'A new report by the U.S. National Bureau of Economic Research found that about 30% of all bond mutual funds contain riskier holdings than what is being reflected by Morningstar.... The report warns that investors may have 'overly safe' assessments of their exposure to fixed-income mutual funds, due to a 'large information chasm' that has developed in recent years between how Morningstar ranks bond funds for riskiness and their actual asset holdings."
