Bonds have been the hottest ETF asset class in 2023. So far, we passed the $2 trillion mark and punched well above our normal weight in the U.S. with $110 billion of net inflows in 2023. In addition, VettaFi saw sentiment shift in the second quarter toward corporate bonds from U.S. government bonds.
VettaFi’s Fixed Income Symposium Dives Into Corporate Bonds
Advisors eager to learn about corporate bond opportunities should join me and portfolio managers from Fidelity and JPMorgan at 12:05 PM ET today. VettaFi’s Fixed Income Symposium kicks off at 11:00 AM. (It might have started as you read this, but that’s okay! Just register). My colleague Tom Lydon and I will be moderating nine short sessions.
After a short break at noon, the second CE credit-approved session will cover corporate bonds. We will be discussing whether credit spreads will widen by year-end, what sectors are most appealing in the corporate bond world, and the use cases for ETFs. If you miss the session, a replay will be available.
What Does the Data Tell Us?
VettaFi and our clients can use a robust dataset, called Explorer, to understand what asset classes, categories, and areas of focus are resonating with our audience. This is helpful for spotting trends and helping asset managers understand what products are in focus.
In the screenshot below from Explorer, note the teal bars toward the top of the chart. They became larger than the green bars at the bottom of the chart.
Interest in U.S. Corporate Bonds Rising in Favor of Treasury Bonds
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In the second quarter of 2023, we had 850,000 engagements for U.S. fixed income through our digital properties. Those properties include content on Advisor Perspectives, ETF Database, and ETF Trends, as well as near-daily webcasts.
A Willingness to Take on Credit Risk Emerged in May and Has Persisted
When the second quarter began, there was a clear preference for investment-grade corporates (green in the below chart) from the VettaFi audience. However, sentiment shifted as signs emerged of a stronger U.S. economy causing an initial pause in the Fed’s rate hiking program. High yield corporate products, which involve greater risk, were being researched more.
Click to enlarge.
A Multisector Bond ETF Favoring High Yield
The JPMorgan Income ETF (JPIE) is one of the ETFs we will be discussing during the fixed income symposium. The ETF is actively managed with the flexibility to invest in most bond sectors, not just corporates. While agency mortgage-backed securities (32% of assets) were the largest at the end of June, the ETF had 23% in high yield corporate bonds. In contrast, management had only 4% in investment-grade corporates. JPIE launched in October 2021 and had $560 million in assets.
How Is an Active High Yield ETF Positioned?
While most dedicated high yield corporate bond ETFs are index-based, the Franklin High Yield Corporate ETF (FLHY) is actively managed. The $220 million offering is constructed based on fundamental research on issuers as well as sector views. As of mid-July, the fund had 17% of assets invested in energy bonds, with industrials (8%) and finance (8%) the next-largest sectors. We will also be discussing the approach used by the team behind FLHY during the fixed income symposium.
VettaFi believes the second half of 2023 will be an exciting time to focus on fixed income. However, it helps to understand investor sentiment and some of the funds available. Join us for the virtual event live or catch the replays.
The replay of the Fixed Income Symposium is now live; registration to view on-demand is available at the link.
For more news, information, and analysis, visit the Fixed Income Channel.