The November issue of our Bond Fund Intelligence, which was sent to subscribers Monday morning, features the lead story, "SSGA on The Rise of ESG in Fixed Income; ETFs Gaining," which reviews a new State Street survey on social trends in bond funds; and "TCW's Steve Kane on MetWest ESG Securitized," which interviews the TCW portfolio manager and looks at their latest offerings. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell again in October and yields inched higher. We excerpt from the new issue below. (Contact us if you'd like to see our latest Bond Fund Intelligence and BFI XLS spreadsheet, or our Bond Fund Portfolio Holdings data.)
BFI's "SSGA ESG" piece reads, "State Street Global Advisors published, 'The Rise of ESG Fixed Income,' which reviews recent trends in environmental, social and governance impacting bond funds and ETFs. They write, 'According to our recent survey of more than 350 global institutional investors, 61% are prioritizing the integration of ESG factors in their fixed income portfolios over the next three years. This validates the strong trend of asset growth in the evolving fixed income ESG universe now comprised of nearly 1,000 funds globally with total assets of $450 billion under management, with $41 billion in North America and $404 billion in Europe.'"
SSGA's piece continues, "Although most of these assets have been invested in active mutual funds, there has been a meaningful uptick in both the number of ESG fixed income exchange traded funds (ETFs) and their adoption by investors. In 2020, ESG fixed income ETFs had inflows of $12.9 billion, more than three times the previous record year. Inflows the first eight months of 2021 have already surpassed that figure. More than half (58%) of all respondents in our survey noted that they will most likely use ETFs as their preferred investment vehicle for increasing allocations to fixed income ESG strategies, with investors in North America (68%) having a stronger preference for ESG-related ETFs than those in Europe (50%)."
The TCW "profile" states, "This month, BFI interviews Steve Kane, co-CIO and generalist portfolio manager at TCW Investment Management. We discuss the new ESG Securitized Bond Fund, TCW and MetWest's broader bond fund lineup, and the manager's latest observations. Our Q&A follows."
BFI says, "Give us a little history." Kane explains, "The fixed income team here at TCW, the core of it at least, originally came from Metropolitan West Asset Management. MetWest was founded by me and a few other PMs, including Tad Rivelle and Laird Landmann.... The three of us began our careers together at PIMCO back in the early 1990s.... MetWest focused initially on core, core plus and traditional multi-sector fixed-income strategies. We then built our team and came over to TCW through an acquisition in 2009. Since that point, we've been heading up the TCW fixed income team."
Kane continues, "TCW maintains mutual funds under the TCW and MetWest names, but for fixed income it's been the same team from 2009 forward. We've grown the assets to about $240 billion, and we have a team of 75 investment professionals. We have 4 generalist portfolio managers overseeing the investing activity and focusing on macro elements of strategy across portfolios -- duration and yield curve and broad sector exposure. Then the balance of the team, 71 people, are divided into sector teams.... There are the traditional fixed-income sectors: corporate credit, securitized credit, government and the rates team, and emerging markets."
Our News brief, "Returns Fall Again, Yields Rise in Oct.," states, "Bond fund returns dropped and yields inched higher last month. Our BFI Total Index fell 0.15% for 1-month but rose 2.79% for 12 months. The BFI 100 returned -0.10% in Oct. and 2.74% over 1-year. Our BFI Conservative Ultra-Short Index was down 0.06% for 1-mo and 0.21% for 1-yr; Ultra-Shorts declined 0.10% and rose 0.84%, respectively. Short-Term decreased 0.32% but rose 1.63%, and Intm-Term fell 0.16% in Oct. but rose 1.58% over 1-year. BFI's Long-Term Index rose 0.14% in Oct. and gained 1.95% over 1-year. Our High Yield Index fell 0.12% in Oct. but gained 9.16% over 1-year."
Another News brief, entitled, "Morningstar Says 'Short-Term Bond Fund Investors Get Active,'" explains, "The short-term bond Morningstar Category has seen increased inflows in the past couple of years -- and in September, it took in more money than any other category. That makes sense given investor worries about future interest rate increases. Perhaps more surprising is that a lot of this money has gone to actively managed funds, reversing a previous trend where short-term bond fund investors favored cheaper passive vehicles."
A third News brief, "PGIM Investments Launches ESG Multisector Fixed Income Fund," quotes a statement from the company, "PGIM Investments is expanding its commitment to environmental, social and governance (ESG) investing with the launch of the PGIM ESG Total Return Bond Fund, its first dedicated ESG strategy offered to U.S. investors. The new fund is an alternative but complementary offering to PGIM's $60 billion PGIM Total Return Bond Fund."
A BFI sidebar "JPM Launches Income ETF," quotes the release, "J.P. Morgan Asset Management Launches Active Fixed Income ETF: JPMorgan Income ETF (JPIE)." They explains, "J.P. Morgan Asset Management announced the launch of JPMorgan Income ETF (JPIE), an active fixed income ETF which targets debt securities across the fixed income universe, seeking to deliver yield with lower volatility and attractive distributions. Using sector allocation shifts, JPIE invests in a wide variety of debt securities that have the potential to maximize income while reducing portfolio-level risk. JPIE draws upon the combined expertise of the firm's Global Fixed Income Currency and Commodities (GFICC) platform, providing the best ideas from diverse asset class expertise and broad investment capabilities."
Finally, a sidebar entitled, "Bond Fund Assets Fall Again," tells readers, "Bond fund inflows slowed and overall assets fell in October, though inflows rebounded the first week of November. ICI's 'Combined Estimated Long-Term Fund Flows and ETF Net Issuance,' says, 'Bond funds had estimated inflows of $12.18 billion for the week, compared to estimated inflows of $7.21 billion during the previous week. Taxable bond funds saw estimated inflows of $10.69 billion, and municipal bond funds had estimated inflows of $1.49 billion.' Over the past 5 weeks, bond funds and bond ETFs have seen inflows of $35.1 billion."
