The November issue of our Bond Fund Intelligence, which was sent to subscribers Tuesday morning, features the stories, "Bond Fund Assets Down Over $1.0 Trillion in Annus Horribilis," which reviews the ongoing outflows and losses in the sector, and "Gross Critiques Total Return Bond Funds; PIMCO's Ivascyn," which reviews a recent blog post from the former "Bond King". BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell again in October while yields rose for the 13th straight month. 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.)
Our "Bond Fund Assets Down" article says, "Bond fund assets declined again in October, the 10th drop in the past 11 months. ICI's asset totals show bond funds declining a massive $1.0 trillion over 12 months (through 9/30), while Crane Data's collection shows assets down another $85.5 billion in October to $2.566 trillion. YTD through 10/31, we show assets down $758.9 billion, or -22.8%."
"ICI's monthly 'Trends in Mutual Fund Investing – September 2022' shows bond fund assets down $238.5 billion, or -5.0%, to $4.533 trillion in September, after declining $107.7 billion in August. Over the 12 months through 9/30/22, bond fund assets fell by $1.067 trillion, or -19.1%. The number of funds declined in September to 2,075, down 4 for the month and down 28 over 1 year.
Our "Gross Critiques" piece states, "Bond guru Bill Gross recently posted a blog entitled, '50 Basis Deposit/No Return.' He writes, 'There are lots of 'total return' bond funds these days, almost a half century since I innovated the concept in 1987. My idea then was to combine interest income with capital gains in bond prices to produce a 'total return' over and above current yields. It worked famously until the beginning of this year."
It continues, "Admittedly, a secular bond bull market was a huge tailwind, but Pimco's Total Return Fund used a host of other non-index strategies to differentiate itself from the pack.... It led to the doubling of Pimco's total assets from $1 trillion to $2 trillion in the following few years.'"
Our first News brief, "Returns Keep Sliding; Yields Up Again," states, "Bond fund returns fell yet again in October though returns weren't as bad as September's slide. Yields rose for the 13th month in a row. Our BFI Total Index fell 0.33% over 1-month and fell 10.57% over 12 months. The BFI 100 lost 0.38% in Oct. and lost 11.79% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.06% over 1-month but down 0.50% for 1-year; Ultra-Shorts fell 0.11% and 1.99%. Short-Term fell 0.13% and 6.21%, and Intm-Term fell 1.02% and 14.41% over 1-year. BFI's Long-Term Index fell 1.38% and 18.32%. High Yield rose 1.97% in Oct. and fell 9.34% over 1-year."
A second News brief, "Morningstar on '12 Top-Performing Bond Funds With High Yields,' says, 'A bright side to this year's brutal selloff in the bond market is that thanks to rising yields, bond fund investors now have considerably more options when looking to add income and the potential for total return to fixed-income portfolios. Consider that the average intermediate-term core bond fund is now yielding 3.58%, according to `Morningstar Direct, up from just 1.24% at the end of Sept. 2021 <b:>`_.'"
Another brief quotes 'Barron's 'These 3 Funds Are Beating the Bear Market in Bonds.' They write, 'Interest rates have skyrocketed this year due to the Federal Reserve's aggressive interest-rate-tightening initiative to tame inflation, causing bond prices to crater. One constituency feeling that pain is fixed-income fund managers, nearly all of whom have struggled to avoid losses. Active fixed-income funds returned an average of minus 12.1%, including interest, this year through Oct. 31, according to Morningstar.'"
A BFI sidebar, "SEC Proposes Swing Pricing, quotes the press release entitled, 'SEC Proposes Enhancements to Open-End Fund Liquidity Framework.' They tell us, 'The Securities and Exchange Commission... voted to propose amendments to better prepare open-end funds for stressed conditions and to mitigate dilution of shareholders' interests. The rule and form amendments would enhance how funds manage their liquidity risks, require mutual funds to implement liquidity management tools, and provide for more timely and detailed reporting of fund information.'"
Finally, another sidebar, "FT: BFs Ready for Rebound," explains, "The Financial Times tells us, 'Fund managers position to woo investors back to bonds.' They write, "Bond fund managers struggling through one of their worst years in decades say the tide is turning as they position to woo investors attracted by higher yields. Nearly $480bn has flowed out of US fixed income mutual funds since the start of the year, according to ICI. While some money moved into ETFs, the majority reflected retail investor flight.... However, outflows have slowed significantly in the past few weeks and even started to reverse in some areas."
