Sour Market Sends Investors to Bond ETFs

After pulling money from fixed income exchange traded funds in early September, investors are returning to those ETFs in droves as stocks slide and equity market volatility rises.

Between Sept. 26 and Oct. 8, U.S. bond ETFs added $9.1 billion in new assets, according to BlackRock data. ETFs issued by BlackRock’s iShares unit, the world’s largest ETF sponsor, took in $6.2 billion of that $9.1 billion.

The trend of inflows to bond ETFs is not new in 2014. Through the first five months of the year, fixed-income ETFs attracted 54% of all exchange traded product inflows. Only two ETFs have brought in more cash than the $5.6 billion added by the Vanguard Total Bond Market ETF (NYSEArca: BND) this year while only five ETFs have seen greater year-to-date inflows than the iShares Core U.S. Aggregate Bond ETF (NYSEArca: AGG). [Bond ETFs Bulk Up]

From Sept. 26 through Oct. 8, BND and AGG added $1.68 billion and $1.59 billion, respectively, in new assets. AGG and BND have been highlighted as beneficiaries of asset flight from PIMCO mutual funds and ETFs, such as the PIMCO Total Return ETF (NYSEArca: BOND), in the wake of Bill Gross’ departure from the firm he co-founded.

Gross announced his departure from PIMCO on Sept. 26, just days after it was revealed the Securities and Exchange Commission is investigating BOND, the actively managed ETF Gross previously managed, for pricing irregularities. [BOND Steady After Gross Departure]

No bond ETF has captured more new assets since Sept. 26 than the iShares Barclays 1-3 Year Treasury Bond Fund (NYSEArca: SHY), which has added $1.73 billion over that period, according to iShares data. The iShares 7-10 Year Treasury Bond ETF (NYSEArca: IEF), which has also been among this year’s most prolific asset-gathering ETFs, is heavier by $640 million since Sept. 26.