By Cinthia Murphy
Managing Editor, ETF.com
The market may have had a difficult start to the year, but net asset flows of more than $15 billion into U.S.-listed bond ETFs in the first quarter suggest market sentiment is changing among bond investors.
The popular Bloomberg Barclays U.S. Aggregate Bond Index posted a loss of -1.48% in the first quarter, yet investors continued to jump into bond ETFs in interesting ways.
First, investors turned to active managers in both the investment-grade and high-yield spaces for help. Actively managed bond ETFs attracted more than $3.1 billion in fresh net assets in the quarter, with the iShares Short Maturity Bond ETF (NEAR) being the most popular fund.
Duration-hedged ETFs were also net gainers, hauling in more than $500 million in the first quarter. Funds like the ProShares Investment Grade-Interest Rate Hedged ETF (IGHG), which add a short Treasury overlay to mitigate interest rate risk, saw sizable net creations.
Finally, ETF investors showed a preference for Treasury ETFs over corporate bond funds, as they were looking for safety in the face of widening credit spreads and market volatility.
Q1 2018 Flows By Focus & Active Per SEC
Data provided by FactSet
Gun Talk Still Making Waves In ETF World
iShares by BlackRock, the largest ETF issuer, is taking a stand on the gun debate, announcing it will launch two gun-free ESG funds, and will implement screens for civilian firearms manufacturers and retailers in its existing bond and equity ESG ETFs.
The company is also making its ESG funds more accessible by cutting fees on the iShares MSCI KLD 400 Social ETF (DSI) and the iShares MSCI USA ESG Select ETF (SUSA).
"BlackRock manages money for a diverse set of investors, including pension plans, insurers and individual investors, who have a wide range of views on firearms," said BlackRock about the moves in the statement. "It is ultimately our clients’ choice about the types of funds they invest in."
Advisors Weigh In On Trade War
Another pressing issue is the brewing U.S.-China trade war. A quick survey of some of the most influential financial advisors in the ETF space showed that tariffs and barriers to trade are at the top of advisors’ concerns—what it means for the economy, for inflation and volatility outlooks, for portfolio management, etc.
Helping their clients navigate this uncertain environment begins with keeping them from making “rash” portfolio decisions, some say.
“There's always going to be volatility in the market,” Blair DuQuesnay, principal and chief investment officer at ThirtyNorth Investments, said. “There will always be another downturn, but keeping investors on track is really the main job of an advisor in these markets.”
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