The March issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the lead story, "Coronavirus Ends Bond Inflow Party; Yields Headed to Zero?," which covers the sudden reversal of bond fund flows, and, "Sustainable Research's Shilling on ESG Bond Funds," which interviews SRA's Henry Shilling. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show bond fund yields fell sharply and returns surged in February. 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. Note: As a reminder, our Bond Fund Symposium conference has been cancelled!)
Our "Coronavirus Ends Bond Inflows" article says, "Suddenly it's all about the coronavirus. Bond yields plunged towards zero and inflows reversed in the latest week as the world froze over fears of the pandemic. We review ICI's most recent update, as well as other flow data, below."
ICI's "Viewpoint," entitled, "Mutual Fund Flows in the COVID-19 Crisis," explains, "The novel coronavirus disease, or COVID-19, is taking a heavy toll on the world economy -- in lives, in the costs of responding, and in lost production and consumption. To be sure, mutual funds and ETFs have seen outflows. And the outflows have been sizable in dollar terms. For example, during the week ending March 4, equity mutual funds had outflows of $14 billion. Bond funds saw outflows of $24 billion."
It continues, "But the outflows were small as a percentage of funds' assets. For the week of March 4, the $14 billion outflow from equity funds totaled just 0.12% of their assets as of the end of January. Outflows from bond funds were 0.50% of their assets as of the end of January, but still quite modest given the size of recent market movements."
Our SRA's Shilling profile reads, "This month, Bond Fund Intelligence interviews Henry Shilling, Director of Research at Sustainable Research and Analysis LLC (www.sustainableinvest.com). We discuss the growing trend of ESG, or environmental, social and governance bond funds and fixed-income investing. Our Q&A follows."
BFI says, "Give us some history." Shilling answers, "SRA is an independent provider of research that's focused on sustainable investing for the benefit of institutional investors. The focus is to monitor and report on this industry through the lens of mutual funds and ETFs that characterize themselves as sustainable, or as sustainable investment vehicles. I started this forum two and a half years ago after I left Moody's, where I spent 25 years."
Shilling continues, "I thought that there was an opportunity to fill an information gap. More and more mutual funds and ETFs were adopting sustainable investing strategies, but I thought that there was a gap between the implementation of those strategies, and reporting and disclosure for the benefit of investors around how those strategies were being implemented."
Our Bond Fund News includes the brief, "Yields Lower, Returns Jump in Feb.," which tells us, "Bond fund yields fell and returns leapt again last month. Our BFI Total Index returned 0.83% over 1-month and 7.30% over 12 months. The BFI 100 returned 0.69% in Feb. and 8.29% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.19% over 1-mo and 2.66% over 1-yr; Ultra-Shorts averaged 0.44% in Feb. and 2.95% over 12 mos. Short-Term returned 0.57% and 5.04%, and Intm-Term gained 1.23% last month and rose 9.72% over 1-year. BFI's Long-Term Index returned 2.27% in Feb. and 13.58% for 1-yr; our High Yield Index fell 1.16% in Feb. but is up 5.11% over 1-year."
In another News brief, we quote the Wall Street Journal piece, "Investors Rush Into Bonds to Shelter from Market Storm." They comment, "Turmoil in financial markets triggered by an oil price war and the outbreak of the coronavirus sent government bond yields to historic lows Monday, as investors sought safety in the least-risky assets they could find.... 'I've never seen this, and I've been doing this for 30 years,' said Scott Thiel, chief fixed-income strategist at BlackRock."
A third News update covers the Financial Times article, "Risks Build in World's Largest Bond Funds." They tell us, "Ultra-low interest rates and a flood of debt issuance by US companies have led to a silent accumulation of risks in some of the world's largest bond funds. Exchange traded funds managed by BlackRock, Vanguard, Charles Schwab and State Street control assets of about $140bn that follow the Bloomberg Barclays US Aggregate bond index.... But soaring US bond prices and record low yields have increased the risk of losses for investors in Agg tracking funds, according to GMO."
Finally, BFI also features a sidebar that covers "Morningstar's "A Compelling Core Bond Fund." The piece explains, "A disciplined process and attractive fees make Baird Aggregate Bond a top choice. The dynamic team behind Baird Aggregate Bond adheres to a disciplined process and benefits from attractive fees. The strategy earns a Morningstar Analyst Rating of Gold on its cheaper share class, while its pricier iteration earns a Silver."
