The February issue of our Bond Fund Intelligence, which was sent to subscribers Friday morning, features the lead story, "Launches in Ultra-Short Space Indicate Sector Heating Up," which reviews new product launches from Federated Hermes and Vanguard; and a "Q&A With J.P. Morgan AM's Harveer Bhalla," which highlights the "Ultra-Short segment from our recent Money Fund University. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund yields were mostly lower and returns were mixed 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.)

BFI's "Launches in Ultra-Short Space" piece reads, "Two of the fastest-growing segments of the bond fund marketplace -- the 'Conservative' Ultra-Short segment and the Ultra-Short ETF segment -- saw new product launches in the past month. Federated Hermes is the latest firm to enter the 'Conservative' Ultra-Short Bond Fund space, while Vanguard announced a new Ultra-Short ETF product for clients. Given investors are stuck looking for yield in another prolonged period of low rates, it's likely more firms will join them."

The piece says, "A press release entitled, 'Federated Hermes, Inc. Launches Two New Microshort Funds ,' explains, 'Federated Hermes, Inc ... a global leader in active, responsible investing, today announced the launch of Federated Hermes Conservative Microshort Fund and Federated Hermes Conservative Municipal Microshort Fund. The actively managed funds offer an innovative approach to liquidity management by pursuing higher yields than money market strategies while simultaneously aiming to maintain lower NAV volatility by investing in securities with shorter maturities than traditional ultrashort products.'"

Our Q&A w/JPMAM's Bhalla article explains, "Last month we hosted our 'basic training' event, Money Fund University, which featured a brief segment on 'Ultra-Shorts'. The piece features a discussion with J.P. Morgan Asset Management Portfolio Manager Harveer Bhalla, which comments on ultra-shorts and JPM's Managed Reserves group, what he's buying and not buying, and the future of ESG in the space."

BFI says, "Give us a little history." Bhalla responds, "I interned with ... [and] I've been working with the Managed Reserves team ever since. To give you an idea of where we sit, you have money market funds at the front end of the curve, then you have the ultra-short space, which is where our Managed Reserves team sits. Then you have the short duration and the core and more long duration type strategies further out the curve."

He continues, "In terms of ultra-short, we exist in that more conservative ultra-short bond fund type strategy -- we straddle money funds and short duration product. What we're doing is we're buying a lot of the similar products that money funds are buying -- CDs, CP, government bills and so forth. But we're also buying corporate bonds, some other asset backed securities. So, we have a broader set of investment opportunities, and we can take on a little bit more risk, both with ratings and with maturity."

Bhalla adds, "This space has grown dramatically in the last few years. I think our team gives a pretty good idea for the whole ultra-short space, in that we have doubled our AUM over the last few years. It now sits at roughly $110 billion."

Our first BFI News brief, "Returns Mixed, Yields Down in January," explains, "Bond fund yields were mostly lower and returns were mixed last month. Our BFI Total Index returned 0.09% over 1-month and 4.09% over 12 months. The BFI 100 fell 0.09% in Jan. and rose 4.69% over 1 year. Our BFI Conservative Ultra-Short Index returned 0.06% over 1-mo and 1.17% over 1-yr; Ultra-Shorts averaged 0.17% in Jan. and 1.36% over 12 mos. Short-Term returned 0.20% and 3.46%, and Intm-Term returned -0.23% last month and 5.32% over 1-year. BFI's Long-Term Index returned -0.77% in Jan. and 6.55% over 1-year. Our High Yield Index gained 0.52% in Jan. and 4.90% over 1-yr."

Another News brief quotes The WSJ's, piece, "The Risks and Rewards of Diversifying Your Bond Funds." They tell us, "[I]nvestors might want to consider adding to their fixed-income portfolios some bond funds that can offer higher yields than U.S. bond index funds and offer varying degrees of protection from the risk of rising rates."

In a third News update, Investor's Business Daily writes, "Best ETFs And Mutual Funds Begin 2021 With A Whimper." They comment, "On the fixed income side, municipal bond funds stood out as the best mutual funds in the space. Riskier bond funds also did better than government bond funds as long-term rates rose. High yield muni debt funds soared 1.71%. They're up 5.8% in the past three months."

Finally, BFI also features the sidebar, "SSGA Searching for Yield." It says, "SSGA's recent 'Investment Outlook,' entitled, 'Searching for Yield in a Sea of Low Rates,' explains, 'In 2020, coordinated central bank efforts -- including quantitative easing (QE) and purchase programs aimed at supporting credit market liquidity -- played a major role in stabilizing and improving the trajectory of fixed income markets. Broad core aggregate bonds returned 7.5% and below-investment-grade corporate credit rallied 33% from the market's bottom to finish up 7% on the year -- pushing the coupon on high-yield bonds to an all-time low of 4.22% to end the year.'"

On a related note, please join us for Crane's Bond Fund Symposium 2021 (Online), which will be hosted virtually the afternoons of March 25-26, 2021. Bond Fund Symposium offers a concentrated and affordable educational experience for bond fund and fixed-income professionals with a focus on the ultra-short sector of the market. Registrations are $250 and "comp" and sponsor tickets are also available. (Ask us if you'd like more information.)

See the latest agenda and details here. Portfolio managers, analysts, investors, issuers, service providers, and anyone interested in expanding their knowledge of bond funds and fixed-income investing will benefit from our comprehensive program. E-mail us for the brochure and more details. Also, mark your calendars for our "big show," Money Fund Symposium, which is scheduled for June 23-25, 2021 in Philadelphia, and for our European Money Fund Symposium, which is scheduled for October 21-22, 2021 in Paris. We hope to see you in person later this year, and we hope to see you virtually in March!

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