The August issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the lead story, "Big Inflows Continue; Bond ETFs Poised to Break $1 Trillion," which examines the continued near-record bond fund inflows, and "Northern's Camden Ranges Ultra Short to High Yield," which interviews NTAM's Brad Camden. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields continued to plummet and returns jumped again in July. 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 Big Inflows piece reads, "Bond funds and bond ETFs continue to see near-record inflows, which we predict will drive total bond ETF assets over the $1 trillion mark for the first time ever this month. ICI shows bond ETFs at $933 billion on June 30, and their weekly flow data shows inflows of $25.0 billion in July (plus NAV increases of about $14.0 billion). Thus, bond ETFs were likely over $970 billion as of July 31, and assets are likely already over $1.0 trillion as inflows and market gains continue in August."
It continues, "ICI's 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance,' says, 'Bond funds had estimated inflows of $27.33 billion for the week, compared to estimated inflows of $18.50 billion during the previous week [and inflows of $23.1 billion the week before that]. Taxable bond funds saw estimated inflows of $23.92 billion, and municipal bond funds had estimated inflows of $3.41 billion.' Over the past 5 weeks, bond funds and bond ETFs have seen record inflows of $106.7 billion."
Our Northern profile says, "This month, Bond Fund Intelligence interviews Brad Camden, Director of Fixed Income Strategy at Northern Trust A.M. He tells us about the history of NTAM in the fixed-income space, talks about the current market environment, and discusses a number of other bond fund issues. Our discussion follows."
BFI says, "Give us a little background." Camden tells us, "In the fixed income space, Northern Trust Asset Management has been managing a mix of sector specific and multi-asset class portfolios for over 40 years. In the mid-'90s, Northern launched the Northern Funds mutual fund family.... The mutual fund complex has been around for over 25 years and has performed well through various economic, business, and monetary cycles."
He continues, "In 2011, NTAM launched FlexShares, an ETF suite of products [which] initially [focused on] the TIPs market but over time evolved into the ultra-short space, the mortgage market and ultimately into the credit markets.... Beyond mutual funds and ETFs, we offer strategies across the yield curve and up and down the quality spectrum in other formats such as SMAs and collective funds."
Camden explains, "I joined Northern Trust Asset Management in 2002, [and] in 2004 I found my home in fixed income. Initially I started working on the high yield desk ... until a spot opened up on the securitized team. I spent time there honing my skills, [and] after a few years, I moved over to the credit team. I [then] moved into more direct portfolio management oversight roles in our Core and Core Plus products and some of our credit products, ultimately managing the investment management team. Since 2018, I've been responsible for the long-duration fixed income team. Specifically, this includes anything outside of cash such as ultra-short, active, passive, and multifactor strategies."
Our Bond Fund News includes the brief, "Yields Move Yet Lower, Returns Jump," which explains, "Bond fund yields fell once again and returns kept surging in July. Our BFI Total Index returned 1.64% over 1-month and 4.87% over 12 months. The BFI 100 gained 1.65% in July and rose 6.16% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.24% over 1-mo and 1.93% over 1-yr; Ultra-Shorts averaged 0.49% in July and 1.76% over 12 mos. Short-Term returned 0.76% and 3.60%, and Intm-Term rose 1.58% last month and 7.97% over 1-year. BFI's Long-Term Index returned 2.51% in July and 11.58% for 1-year. Our High Yield Index rose 3.52% last month but is up just 1.50% over 1-year."
In another News brief, we quote Mornginstar's piece, "How Risky Is Risky in World-Bond Funds?" They write, "Global-bond fund managers routinely disclose fund-level credit-quality, sector, region, and country exposure breakdowns on their websites, but it can be extremely difficult to deduce where a strategy is taking its credit risk. It can also be hard to discern how far afield it is from the commonly used Bloomberg Barclays Global Aggregate Bond Index. Earlier this summer we rolled out a new Fixed Income Exposure Analysis, or FIEA, component for Morningstar Direct and Morningstar Office users to help investors make sense of their individual portfolios and thereby make better comparisons across funds."
A third News update covers the CNBC article, "People are yield-searching." It tells us, "The hunt for yield is on in full force. As investors clamor for income in an era of historically low interest rates, one part of the ETF market is reaping the benefits: bond funds. 'More money has gone into bond funds than any other asset class in ETFs,' Harry Whitton, head of ETF sales and trading at Old Mission, told CNBC's 'ETF Edge'.... If you go back all the way, back to when the pandemic started, bonds have really been the king.'"
BFI also features a sidebar that covers the WSJ piece, "Vanguard Challenges Bond Behemoths With Active Funds." It discusses "the company's rapid growth in short-term and ultra-short bond funds. They explain, 'Vanguard Group, the titan of low-cost index funds, is coming after a fast-growing pocket of the money-management industry: actively managed bond funds. The firm's investment dollars in such funds pushed past the half-trillion mark for the first time in June, a potential problem for competitors such as BlackRock Inc., Fidelity Investments, Pimco and Western Asset Management Co., which have long dominated bond investing."
Finally, a brief entitled, "JPMAM McNerny's Podcast," explains, "J.P Morgan Asset Management launched a series of 'Audio Commentaries,' one of which features Managed Reserve Portfolio Manager James McNerny. He says, 'In front end flows, we saw over $1 trillion make its way into U.S. money market funds in March and April. With the Fed keeping overnight rates at the near-zero bound, that means there is a lot of money now on the sidelines earning yields very close to zero. Because of that, and the confidence returned to the ultra-short and short-term credit markets, we've seen investors returning to the ultra-short space, willing to move modestly out the curve in search of yield.'"
