Megaphone icon ETF Database is now VettaFi. Read More >
ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • Entrepreneur ETF
    • Equity ETF
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Future ETFs
    • Gold & Silver Investing
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Modern Alpha
    • Multi-Asset
    • Multi-Factor
    • Portfolio Strategies
    • Retirement Income
    • Smart Beta
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Videos & Podcasts
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Fixed Income Channel
  2. Advisors Turn to ETFs While Bond Mutual Funds Bleed
Fixed Income Channel
Share

Advisors Turn to ETFs While Bond Mutual Funds Bleed

Todd RosenbluthJun 06, 2022
2022-06-06

It was a brutal first five months of 2022 for bond investments, with the Bloomberg Aggregate Bond Index down 9%. Advisors have long built asset allocation strategies with a healthy dose of fixed income exposure. Historically, bonds provided total return through income and stability even when equities decline in value. However, 2022 has been different due partly to recent and likely pending interest rate hikes by the Federal Reserve that caused many bonds to decline in value. 

With the losses, there has been money in motion within the asset management space. Year-to-date through May 25 (latest available), bond mutual funds incurred significant redemptions, totaling an estimated $242 billion based on Investment Company Institute (ICI) data. While bond mutual fund outflows accelerated to more than $90 billion in May, bond ETFs pulled in $34 billion of new money over the whole month, more than the category gathered in the first four months of the year, according to FactSet data.

Indeed, while there are only two bond ETFs among the 10 most popular for the year, there were five bond ETFs among the 10 highest industry-wide net inflows in May. The iShares National Muni Bond ETF (MUB A+) led the charge last month with $3.9 billion of net inflows, followed by the Vanguard Short-Term Bond ETF (BSV A) and the SPDR Bloomberg 1-3 Month T-Bill ETF (BIL B+). While BSV and BIL incur minimal risk, investors also shifted $2 billion-plus in new money into the iShares iBoxx $ High Yield Corporate Bond ETF (HYG A) and the iShares 20+ Year Treasury ETF (TLT B-), which sport higher yields in exchange for taking on more credit or interest rate risk. 

Domestic equity mutual funds have been bleeding assets for years as advisors and end-investors moved toward equity ETFs, yet bond mutual fund investors traditionally were more loyal. There are likely several long-term drivers of this trend, including a generational shift, growing adoption of bond ETFs by advisors and institutional investors, tax-loss harvesting, and a preference to pay lower fees establishing when losses are being incurred.

According to Morningstar, the average intermediate core bond fund declined 9.0% in the first five months of 2022, essentially in line with the losses incurred by the iShares Core Aggregate Bond ETF (AGG A+) and the Vanguard Total Bond Index ETF (BND A). Returns were similarly poor for bond mutual funds that incur additional credit risk; the average core plus bond fund fell 8.9%.

Although most bond mutual funds are actively managed and most bond ETFs track an index, in recent years asset managers have launched a variety of actively managed bond ETFs. In 2022, the Capital Group Core Plus Income ETF (CGCP), the Fidelity Total Bond ETF (FBND B-), and the JPMorgan Core Plus Bond ETF (JCPB) are some of the active core or core-plus with net inflows.

As losses are likely to pile up this year for bond mutual funds, we expect more advisors and end clients to shift allocations toward ETFs.

To receive more of Todd’s research, reports, and commentary on a regular basis, please subscribe here.

For more news, information, and strategy, visit VettaFi.com.

Loading Articles...
Help & Info
  • Contact Us
  • Mission Statement
  • Press
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © ETF Flows LLC
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X