JPM Low Duration Bond Fund Update
J.P. Morgan Securities' latest "Short-Term Market Outlook & Stragegy includes a brief "Low duration bond fund update." They write, "Consistent with the broader U.S. fixed income markets, total short-term funds (effective duration of 1.5-3.5y) and ultra-short term bond funds (effective duration of 0.5-1.5y) saw significant outflows last year prompted by the Fed's aggressive tightening agenda. Based on the bond funds we track, low duration bond fund AUMs declined by an estimated $150bn (or 15%) YoY, to $841bn as of December-end: short-term fund AUMs declined by $117bn, and ultra-short term fund AUMs declined by $33bn." They add, "Not surprisingly, short-term credit funds saw most of the outflows last year (-$118bn) given their longer duration relative to ultra-short bond funds and money funds. In fact, total returns for short-term bond funds significantly underperformed last year, delivering substantial negative total returns on a 1y basis relative to ultra-short bond funds and MMFs.... In contrast, MMFs meaningfully outperformed as they benefitted from extremely low WAMs and quicker resets in an aggressively rising interest rate environment." (Watch for more coverage in the upcoming February issue of our Bond Fund Intelligence publication.)
