Vanguard winning at bond inflows, too

But iShares is strong competition

Jul 25, 2017 @ 4:55 pm

By John Waggoner

Most people know that Vanguard has been vacuuming up stock assets faster than an elephant in a peanut warehouse. But what company is leading in scooping up bond-fund assets?

That would be Vanguard.

Of the 30 top-selling taxable bond mutual funds and exchange-traded funds in the Morningstar database, 10 are Vanguard funds. Altogether, they have seen estimated net flows of $113 billion in the past 12 months, or 49% of the total net inflows to the 30 best-selling funds and ETFs.

The top-selling Vanguard bond fund, Vanguard Total Bond Market II Index fund (VTBIX), saw net inflows of $28.9 billion in the past 12 months, according to Morningstar estimates. Vanguard Total International Bond Index fund (VTIFX) took second place, with a $26 billion inflow.

Not surprisingly, the bulk of the hottest-selling bond funds are passively managed index funds. Only a handful of actively managed funds — including PIMCO Income (PIMX), with $21.8 billion in net new cash and Prudential Total Return Bond (PDBAX), with $8.7 billion. "Bond funds are still a place where investors and advisers believe in active management," said Todd Rosenbluth, senior director of ETF and mutual fund research at CFRA.

Vanguard isn't without some tough competition — particularly iShares, which has the oldest exchange-traded bond funds. Four iShares funds, launched by then-owner Barclays Global Investors, were the first bond ETFs ever launched, and are celebrating their 15th anniversary. While two Vanguard ETFs are the best selling bond ETFs over the past 12 months, iShares has five of the best-selling bond ETFs. And of the 30 top-selling bond ETFs, 17 have "iShares" in front of their names.

Mr. Rosebluth thinks the trend towards bond ETFs will continue, and that Vanguard and BlackRock will continue to dominate. "Vanguard and BlackRock are dominating not only in ETF sales, but in particular in fixed income ETFs. That will only accelerate as investors get more comfortable with the ETF wrapper."

The low fees offered by most ETFs are a big selling point. The bellwether 10-year Treasury note currently yields just 2.3%, and the average intermediate-term government bond fund has gained just 1.1% the past 12 months. Both fund companies have the economies of scale to cut expenses to the bone — and in so doing, forcing competitors to keep costs low, too. Mr. Rosenbluth counts 44 bond ETFs with expense ratios of 0.1% or less, including two funds — Schwab U.S. Aggregate Bond ETF (SCHZ) and Vanguard Total Bond Market Index fund (BND) — that charge just 0.04% a year in expenses.

0
Comments

What do you think?

View comments

Recommended for you

Deputy editor Bob Hordt and senior columnist Bruce Kelly discuss the reasons for the marked shift of advisers between channels, including technology, the DOL fiduciary rule and the broker protocol.

Recommended Video

Channels

Latest news & opinion

Capital Group, sponsor of American Funds, wins 401(k) lawsuit

Decision comes as financial services companies, especially those focused on active management, have been sued for self-dealing.

SEC considers barring aggrieved investors from suing companies

Swept up by pro-business zeitgeist, regulator seeks to reverse two-decade slump in U.S. stock listings.

Wells Fargo, Morgan Stanley use contrary tactics to keep advisers

Wells is helping brokers transition to independence within the firm, while Morgan is taking them to court.

Goldman's measure of risk appetite hits record

Global stocks and U.S. Treasuries are seeing their most "extreme" start to a year ever, bank says.

Wells Fargo erasing hurdles for advisers looking to move to its IBD

If advisers commit to staying at FiNet for a two-to-three year period, they will not have to pay Wells the fees it currently charges advisers switching channels.

X

Hi! Glad you're here and we hope you like all the great work we do here at arjuna-design. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting arjuna-design.com? It'll help us continue to serve you.

Yes, show me how to whitelist arjuna-design.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Last News

insurance company ranking 2014 mandatory withdrawals from 401k scgdx john hancock international equity index fund t rowe price 2030 john hancock funds performance deadline for sep ira how do i claim rental income on my taxes franklin templeton income vanguard high yield corporate admiral trow price com can you break an irrevocable trust social security benefits from deceased spouse woodbridge mortgage investment fund 1 llc t rowe price personal strategy income fund vanguard total bond market index fund h and r block tax preparation fees td ameritrade commission free etf portfolio bond funds for rising interest rates mutual fund that averaged 12 for 5 years collegeinvest direct portfolio college savings plan reits in a rising interest rate environment transamerica advisors life insurance company of new york california municipal bond rates wells fargo stable return fund n35 ticker old coin values with pictures college loans no cosigner housing loan tax exemption rules blackrock global allocation fund performance charles schwab employee 401k 401k rollover tax form schwab bank cd rates blackrock lifepath 2040 a max contribution to hsa pa 529 plan reviews roth ira tax break