If investors weren’t adding fixed income to their portfolios, they certainly are now. A new report on exchange-traded fund (ETF) flow data from State Street Global Advisors, fixed income exchange-traded fund (ETF) inflows were out of this world in the month of June, garnering over $25 billion.
“Even with a 6% rally in global equities, investors allocated a record amount to fixed income ETFs,” wrote Matthew Bartolini, CFA Head of SPDR Americas Research State Street Global Advisors, in the report. “Equity ETFs did garner $20 billion of inflows. However, inflows to bonds were truly out of this world with over $25 billion –a more than 45% increase over the prior record from October of 2014.”
The record number of inflows into bond ETFs allowed for record capital allocations into the fixed income space.
“Bonds’ record June haul pushed the first-half figure to $74 billion, which is also a record amount for a first half,” Bartolini noted. “This surpassed the $70 billion bond ETFs amassed in 2017, a time period that was aided by regulatory tailwinds emanating from the fiduciary rule that led to all ETFs having a record amount of fund flows once the year was over.”
As the U.S.-China trade deal that was supposed to happen went south, investors increased their exposure to fixed income to a point where it reached a six-year high during the month of May as negotiations unraveled, according to the latest AAII Asset Allocation Survey.
As such, other notable trends included a decreased exposure to equities and an increase of investors sitting on the sidelines with cash.
- Allocations to stocks and associated funds declined 2.0 percentage points to 65.8 percent
- Equity allocations remain above their historical average of 61.0 percent for the 74th consecutive month
- Bond and bond fund allocations rose 1.8 percentage points to 18.9 percent
- Fixed-income allocations were last higher in April 2013 (19.7 percent)
- May was the fourth time in five months with bond and bond fund allocations above their historical average of 16.0 percent
This latest data could provide insight on a repeat performance of fixed income’s first quarter. It’s no doubt that the volatility-laden fourth quarter of 2018 spurred an investor move to bonds, but that trend persisted in the first quarter of 2019 with $34.5 billion going into fixed income exchange-traded funds (ETFs), according to a US-Listed Flash Flows Report from State Street Global Advisors.
As opposed to simply adding a broad-based fund, it will take more of a strategic bent, such as looking into actively-managed funds or other corners of the bond market like municipal debt.
Nonetheless, here are the 10 biggest fixed income ETFs based on total assets:
|Symbol||ETF Name||Total Assets ($MM)|
|AGG||iShares Core U.S. Aggregate Bond ETF||$64,283.72|
|BND||Vanguard Total Bond Market ETF||$42,188.51|
|LQD||iShares iBoxx $ Investment Grade Corporate Bond ETF||$36,366.87|
|SHV||iShares Short Treasury Bond ETF||$24,547.50|
|VCIT||Vanguard Intermediate-Term Corporate Bond ETF||$24,206.73|
|VCSH||Vanguard Short-Term Corporate Bond ETF||$24,093.07|
|BSV||Vanguard Short-Term Bond ETF||$22,469.31|
|TIP||iShares TIPS Bond ETF||$20,071.02|
|HYG||iShares iBoxx $ High Yield Corporate Bond ETF||$19,476.58|
|BNDX||Vanguard Total International Bond ETF||$19,041.50|