ETF Chart of the Day: Time for Total Bonds

“U.S. Total Bond Market” funds have been rather active this week, with well-known benchmark name AGG (iShares Core Total U.S. Bond Market, Expense Ratio 0.08%) seeing creation activity that has netted more than $600 million is the past several sessions.

The ETF now has a massive $15.2 billion in total AUM and averages more than 1,000,000 shares per day. It is actually ranked second in the Total Bond Market space in terms of assets under management, behind BND (Vanguard Total Bond Market, Expense Ratio 0.10%) which has $17.6 billion in assets under management currently.

BND has been somewhat active in recent trading sessions as well, pulling in about $250 million in fresh new assets during the same time frame as AGG. Key differences across the Total Bond Market ETF space are tied to index methodology and how it affects the composition of the underlying fixed income baskets, as well as other variations such as in duration.

BSV (Vanguard Short Term Bond, Expense Ratio 0.11%) is another well-known and giant fund in this space, falling right behind AGG in terms of overall assets with $14 billion, but the fund is much different from both AGG and BND in that it invests in fixed income securities that mature in a 1 to 5 year time frame, and the underlying index includes issues from the U.S. government, corporations (investment grade only), as well as
international issues (dollar denominated and investment grade) whereas both AGG and BND are proxies for the U.S. investment grade bond market.

AGG for instance has a weighted average maturity among its bond holdings of 6.74 years, and BND’s number is 7.5 years here, which clearly illustrates the duration differences in these funds versus say a BSV. There are a total of nineteen different ETFs categorized in the Total Bond Market category, and based on the large asset levels of the aforementioned funds as well as other giants including BIV (Vanguard Intermediate Term Bond, Expense Ratio 0.11%), BOND (PIMCO Total Return, Expense Ratio 0.55%), and GVI (iShares Barclays Intermediate Government/Credit Bond, Expense Ratio 0.20%) to name a few, there is clearly potential for growth in terms of asset raising and the development of new strategies here.