By Todd Rosenbluth, CFRA
In the first quarter of 2018, actively managed fixed income funds pulled in $26 billion of new money, just slightly ahead of the $25 billion gathered by passively managed bond funds, according to Bloomberg data. This is in sharp contrast to the equity fund space, where active funds shed $13 billion, bleeding additional assets to passive fund alternatives ($64 billion). Yet, while many investors think of active fixed income in a mutual fund wrapper and passive in an ETF one, fund flows suggest the lines are blurred.
Investors added $23 billion to actively managed bond mutual funds in the first three months of 2018, down 31% from the prior quarter and 50% from a year ago. Meanwhile, actively managed bond ETFs pulled in $3.3 billion, up 21% from the December quarter and 38% from a year ago. In recently months, investors favored ETFs that incurred minimal interest sensitivity, as rising interest rates remained top of mind.
At $8.8 billion in total assets, PIMCO Enhanced Short Maturity Active ETF (MINT) is the largest of the active ETFs. During the first quarter the fund pulled in $541 million. Though MINT has a duration of just 0.5 years, the investment-grade focused ETF sports a 1.6% 30-day SEC yield. In independently rating bond ETFs and mutual funds, CFRA uses yield, credit quality and duration as a three-legged stool to identify where the strong risk-adjusted yield can be found.
MINT’s top overall CFRA ETF rating is also due to its tight penny bid ask spread, 0.35% expense ratio and bullish technical trends.