The July issue of our Bond Fund Intelligence, which was sent to subscribers Monday morning, features the stories, "Worldwide BF Assets Hit $12.0 Trillion, Led by US, Lux, Ireland," which reviews the worldwide Bond Fund assets covered by ICI, and "Money Fund Symposium '23: Martucci & Weaver on Ultras," which excerpts from our most recent Money Fund Symposium that was held In Atlanta, Georgia last month. BFI also recaps the latest Bond Fund News and includes our Crane BFI Indexes, which show that bond fund returns fell in June while 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.)
Our lead article states, "Bond fund assets worldwide increased in the latest quarter to $12.0 trillion, led higher by the four largest bond fund markets -- the U.S., Luxembourg, Ireland and Brazil. ICI's 'Worldwide Open-End Fund Assets and Flows, First Quarter 2023' says, 'Worldwide regulated open-end fund assets increased 5.0% to $63.12 trillion at the end of the first quarter of 2023.... ICI compiles worldwide regulated open-end fund statistics on behalf of the International Investment Funds Association (IIFA).'"
It continues, "They explain, 'The growth rate of total regulated open-end fund assets reported in US dollars was increased by US dollar depreciation over [Q1] 2023.... Bond fund assets increased by 4.0% to $11.99 trillion in the first quarter. Balanced/mixed fund assets increased by 2.8% to $7.23 trillion in the first quarter, while money market fund assets increased by 6.9% globally to $9.46 trillion.'"
Our "Money Fund Symposium" piece states, "Crane Data recently hosted its big Money Fund Symposium show in Atlanta, where over 530 money market professionals discussed rates, pending reforms, asset inflows and a number of other hot topics in cash. There was some discussion further out the curve, though. The session, 'Ultra-Short Bond Funds & Beyond Cash,' featuring Dave Martucci of J.P. Morgan Asset Management and Jeff Weaver of Allspring Global, discussed the latest, while there was also a segment on 'Local Government Investment Pools & SMAs.' (Note: Conference materials and recordings are available in our Money Fund Symposium 2023 Download Center.)"
It continues, "Martucci comments, 'The only rule to be in the ultra-short category is 'one year and in duration.' Other than that, you're pretty much free to do what you want. Now, we have designed our [Managed Reserves] product as really a step outside of money market funds, leveraging our expertise in the money market fund space [and using those] best practices. But [the space] really goes from one step out of the money market fund to ... even high yield. So, there's a lot of structured product.'"
Our first News brief, "Returns and Yields Higher in June," says, "Bond fund returns rose and yields were mostly higher last month. Our BFI Total Index increased 0.36% over 1-month and is up 2.23% over 12 months. The BFI 100 rose 0.10% in June and rose 1.46% over 1-year. Our BFI Conservative Ultra-Short Index was up 0.39% over 1-month and is up 3.69% for 1-year; Ultra-Shorts also rose 0.39% and are up 3.43% over 12 mos. Short-Term fell 0.18% and rose 1.43%, and Intm-Term fell 0.25% and fell 0.26% over 1-year. BFI's Long-Term Index rose 0.05% and 0.01%. High Yield rose 1.56% in June but rose 7.89% over 1-year.
A second News brief, "Reuters Writes, 'US Bond Investors Eked Out Positive Returns.' The article says, 'U.S. government bond investors have racked up positive returns so far this year, with the higher income from bonds offering a buffer against market weakness if the Federal Reserve increases interest rates again.'"
Our next News brief, "The 'It's Time to be Bolder With Bonds' Says Barron's. They write, 'Holding cash and short-dated bonds has been a winning combination this year. [H]olding nearly risk-free government bonds in the first half of 2023 'was kind of a no-brainer,' says Lori Van Dusen, CEO and founder of LVW Advisors. It's tempting to stay in the perceived safety of cash and the short end, but financial advisors and bond market watchers say investors who have their liquidity needs covered should venture out on the yield curve into slightly longer-dated to intermediate-term bonds to lock in higher rates.... Janet Rilling, senior portfolio manager and head of the Plus Fixed Income team at Allspring Global Investments, says timing the 'Goldilocks moment' of buying longer-dated bonds just before the Fed cuts rates is hard. Investors who wait too long risk losing out when the rate cuts start.'"
Another brief, "ETF Trends, also writes, 'ETF Offers ESG Angle on Ultrashort Bonds,' which says, 'Morgan Stanley launched the actively managed Calvert Ultra-Short Investment Grade ETF (CVSB) along with five other environmental, social, and governance (ESG) funds under the Calvert brand earlier this year. Brian Ellis, an executive director with Morgan Stanley, is one of the portfolio managers for the ESG ultra-short bond fund. VettaFi spoke with him about the fund's management and how it incorporates ESG principles.
ETF Trends also published, 'Fixed Income ETFs Have Many Uses.' The piece, also written by VettiFi, tells us, ‘Fixed income ETFs continue to gain in popularity, but not all investors are taking the same approach.... During a late June webcast with John Hancock, VettaFi asked advisors to best describe how they used fixed income ETFs.... Just over one-third of respondents (35%) were using ETFs alongside core and core plus mutual funds. Meanwhile, just under one third (29%) were combining active and passive approaches. The remainder (15%) were building fixed income portfolios using individual F-I sectors.'"
A BFI sidebar, "Barron's Torn on Cash," says, "The Barron's article, 'Cash Isn't the Only Low-Risk Income Investment,' explains, 'These are the halcyon days of cash. Money-market funds and Treasury bills offer yields around 5% with virtually no credit or interest-rate risk. Long-term Treasuries yield less than short-term ones, a condition known as an inverted yield curve, so there is no immediate upside for venturing into later maturities. Plus, yield curve inversion is a remarkably prescient harbinger of a future recession, making corporate bonds unappealing.'"
Finally, another sidebar, "BlackRock on Bond ETFs," comments, "BlackRock writes, 'Put cash to work with bond ETFs.' They explain, 'Traditional savings accounts are top of mind these days at a time when financial advisors may be looking to get more out of their clients' savings and reducing concentration to any one financial institution. One possibility: short-term bonds, which are currently offering higher yields than any time in the past 15 years. Clients may be able to invest in short-term bonds with ETFs to potentially earn more income with cash they don't need in the near future.'"
