June 23, 2017

Investors Flock to Taxable Bond Mutual Funds During First Half 2017

by Patrick Keon

Taxable bond mutual funds have taken in $97.4 billion of net new money for year to date 2017. This outdistances by far the fund-flow results for Thomson Reuters Lipper’s other fund macro-groups: money market funds (-$100.6 billion) and equity funds (-$11.5 billion) have both seen net money leave their coffers, while municipal bond funds have managed to post a small gain of $9.3 billion. The lion’s share of the net new money captured by taxable bond funds (+$60.7 billion) has gone into funds in Lipper’s short/intermediate investment-grade debt classifications: Core Bond Funds (+$30.2 billion), Ultra-Short Obligation Funds (+$10.0 billion), Core Plus Bond Funds (+$8.6 billion), Short Investment-Grade Debt Funds (+$6.5 billion), and Short/Intermediate Investment-Grade Debt Funds (+$5.4 billion).

In these peer groups the positive net flows have been fairly concentrated as the ten largest individual fund net inflows account for over $41.9 billion. The largest net inflows (+$12.9 billion) belong to Vanguard Total Bond Market II Index Fund, which is in Lipper’s Core Bond Funds peer group. Three other Vanguard mutual funds are in the top ten and are responsible for attracting another $8.9 billion combined of net new money. Fidelity Management & Research Company has placed two Core Bond Funds in the top ten: Fidelity Total Bond Fund and Fidelity U.S. Bond Index Fund have had positive net flows of $3.0 billion and $2.9 billion, respectively. Rounding out the funds with the largest net inflows for the short/intermediate investment-grade debt fund peer groups are T. Rowe Price New Income Fund (+$4.2 billion), Prudential Total Return Bond Fund (+$3.8 billion), Lord Abbett Short Duration Income Fund (+$3.1 billion), and Morgan Stanley Institutional Ultra-Short Income Fund (+$3.0 billion).

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