Investors have been pumping more money into the Vanguard Intermediate-Term Corporate Bond ETF (VCIT) than any other U.S. listed corporate bond ETF over the past four weeks, signaling strong investor appetite for not only high-quality corporate fixed income but also longer durations for this asset class.
Data from VettaFi show that as of Wednesday, VCIT brought in nearly $121 million over the past seven days. This is well more than double the inflows of the second most popular corporate bond ETF of the week, the Vanguard Long-Term Corporate Bond ETF (VCLT), also a Vanguard fund.
Over the past four weeks ended May 3, VCIT drew in more than $545 million. This is again more than twice the flows VCLT saw during that period. The intermediate-term corporate bond fund from Vanguard saw $801 million in inflows during April.
VCIT offers exposure to investment-grade corporate bonds that fall in the middle of the maturity spectrum. The fund tracks the Bloomberg U.S. 5-10 Year Corporate Bond Index, whose securities have maturities between five and 10 years. It carries an expense ratio of 0.04%.
See more: “Vanguard: We’re Not Ready to Be Risk-On Just Yet”
VCIT returned nearly 3.6% year-to-date as of May 2.
The recent popularity of VCIT – and VCLT, for that matter – show that, despite prognostications of an impending recession, investors aren’t afraid of a little extra duration in their fixed income portfolios.
“The vast universe of individual corporate bonds and the decentralized nature of the marketplace can make such bonds relatively illiquid and difficult to trade, especially compared with trading a ready-made basket of bonds through an ETF,” according to Vanguard. “Corporate bond ETFs now loom large as liquidity providers, lowering the cost for investors to add corporate credit into their portfolios in a scalable and diversified way.”
For more news, information, and analysis, visit the Fixed Income Channel.