September 18, 2020

Refinitiv Lipper Chart of the Week: Core Bond Funds Experience Record-Setting Net Inflows

by Pat Keon, CFA.

Funds in Refinitiv Lipper’s Core Bond classification (including both mutual funds and ETFs) took in $1.6 billion of net new money for the fund-flows week ended Wednesday, September 16. The Core Bond Funds peer group has rebounded strongly from the COVID-19 induced slump that it experienced (as did most fund asset groups) at the tail end of the first quarter. After suffering $44.0 billion in net negative flows during Q1 (its worst quarterly net outflow ever), the peer group has bounced back with its two best quarterly net positive flows in its history, growing its coffers by $55.3 billion and $48.0 for the third quarter (to date) and the second quarter, respectively. Funds in the Core Bond classification have currently taken in net new money for 23 consecutive weeks.

Taxable bond funds in general have also experienced a fund-flows resurgence since the end of Q1. Similar to the Core Bond Funds peer group, taxable bond funds experienced their worst quarterly net outflow during the first quarter (-$187.3 billion) and has followed that with its two-best quarterly net inflows (+$176.1 billion and +$162.2 billion). The chart below illustrates the taxable bond fund classifications with the largest year-to-date net inflows and a quarter-by-quarter comparison of their results. As could be expected during these uncertain economic times, all of the peer groups in the chart (with the exception of High Yield Funds) invest primarily in investment-grade debt, with Core Bond Funds leading the pack with combined net inflows of $103.3 billion since the end of Q1. The High Yield Funds peer group, which contains funds that invest mostly in below investment-grade (or riskier) debt, is in second place for combined net positive flows since the end of Q1, at $55.7 billion.

In the Core Bond Funds space, the net positive flows since the end of the first quarter have been dominated by passively managed products. Of the five largest individual net inflows in the peer group during this time frame, only one (American Funds Bond Fund of America) belongs to a fund that is actively managed. The two largest individual net positive flows are attributable to Vanguard products, as the Vanguard Total Bond Market II Index Fund and Vanguard Total Bond Market Index Fund have grown their coffers by $22.5 billion and $20.7 billion, respectively, since the end of March. The remainder of the most significant captures of net new money belong to iShares Core US Aggregate Bond ETF (AGG, +$8.8 billion), American Funds Bond Fund of America (+$7.9 billion), and Fidelity US Bond Index Fund (+$5.1 billion).

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