These are the 10 bond funds that investors poured the most money into over the past year (and how that worked out for them)

view original post
johannes eisele/Agence France-Presse/Getty Images

Remember the age-old advice for facing peer pressure? “If all of your friends jumped off a bridge, would you do it, too?” When analyzing bond funds with the biggest net inflows of the past year, one expert suggests asking yourself the same question.

As the Federal Reserve continues to raise rates to combat soaring inflation, many investors have sought shelter from a struggling stock market in fixed-income. And while expectations were that these funds would bring stabilization, or potential gains, data show the most popular in the past year recorded double-digit losses. The 10 fixed-income mutual funds with the biggest net inflows, and with at least $100 million in assets, netted a combined $83.4 billion during the 12 months ending on Aug. 31, Morningstar data show. The same funds, however, also posted an average loss of 12.9%.

That said, the bond industry’s benchmark, the iShares Core U.S. Aggregate Bond ETF, better known as the AGG, also struggled this past year with an 11.79% loss. And the story wasn’t much brighter in equities. For comparison, stock benchmarks like the SPDR S&P 500 ETF Trust, or SPY, recorded a loss of 12.22%, while the SPDR Dow Jones Industrial Average ETF Tracker, DIA, had a 9.98% loss.

This is likely why investors have been scrambling, said Marc Pfeffer, managing director at S64 Capital Innovation. “Generally when people go out of equities and they run into fixed income, their expectation is that it’s a safe haven. That’s not been the case here,” he explained, adding that many investors sought solace from stocks in the beginning of the year as they dropped due to rising inflation. 

Many investors also did so by moving to low-cost funds. The average net expense ratio in this ranking was 15 basis points, well below the asset-weighted average expense ratio across all funds, which was 0.40% in 2021, according to Morningstar’s latest fee study. And with the current inflation rate today standing at 8.5%, coupled with the Fed’s latest 75-basis-point rate in July, there’s no wonder investors have made moves to perceptual safety. 

“If interest rates go up, the expectation is that valuations are going to go down. But there’s less of an understanding surrounding fixed income and how that moves,” Pfeffer said, adding, that “when you buy an actual bond, and interest rates move higher, you will incur an unrealized loss; and unless you sell it you are only giving up opportunity cost, assuming no credit default of course. Then when the bond matures you get your full principal plus interest back.”

Fixed-income funds in this list ranking had assets of at least $100 million and investment minimums of less than $100,000. Daily returns are as of Sept. 2. All data is from Morningstar Direct. (Fidelity and Vanguard declined to comment on the performance figures in this report.)

10. Fidelity SAI Total Bond (FSMTX)

1-yr. net share class flow (millions): $3,564.61

YTD return: -10.65%; 1-yr. return: -10.65%; 3-yr. annualized return: -0.74%; YTD net share class flow (millions): $2,517.23; 3-yr. net share class flow (millions): $6,222.99; Net expense ratio: 0.3%; Minimum initial investment: N/A; Fund size (millions): $19,149.15; Inception date: 10/25/2018; Manager names: Celso Munoz, Ford E. O’Neil, Michael K. Weaver and Michael R. Foggin

9. Fidelity SAI US Treasury Bond Index (FUTBX)

1-yr. net share class flow (millions): $4,909.06

YTD return: -10.05%; 1-yr. return: -11.07%; 3-yr. annualized return: -2.37%; 10-yr. annualized return: 0.28%; YTD net share class flow (millions): $4,302.89; 3-yr. net share class flow (millions): $9,403.07; 5-yr. net share class flow (millions): $15,668.95; Net expense ratio: 0.03%; Minimum initial investment: N/A; Fund size (millions): $15,543.53; Inception date: 3/1/2016; Manager names: Brandon C. Bettencourt and Richard Munclinger

8. Fidelity SAI Long-Term Treasury Bond Index (FBLTX)

1-yr. net share class flow (millions): $5,179.21

YTD return: -24.76%; 1-yr. return: -25.08%; 3-yr. annualized return: -7.62%; 5-yr. annualized return: -0.63%; YTD net share class flow (millions): $535.83; 3-yr. net share class flow (millions): $7,301.43; 5-yr. net share class flow (millions): $6,807.63; Net expense ratio: 0.03%; Minimum initial investment: N/A; Fund size (millions): $5,817.40; Inception date: 10/8/2015; Manager name: Brandon C. Bettencourt and Richard Munclinger

7. Vanguard Total International Bond II Index Investor (VTIIX)

1-yr. net share class flow (millions): $6,056.63

YTD return: -10.26%; 1-yr. return: -11.56%; YTD net share class flow (millions): $5,626.83; Net expense ratio (%): 0.13%; Minimum initial investment: N/A; Fund size (millions): $96,733.71; Inception date: 2/26/2021; Manager name: Joshua C. Barrickman

6. Fidelity Series 0-5 Year Inflation-Protected Bond Index (FSTZX)

1-yr. net share class flow (millions): $6,632.67

YTD return: -1%; 1-yr. return: -0.08%; YTD net share class flow (millions): $2,651.13; Net expense ratio: 0%; Minimum initial investment:N/A; Fund size (millions): $6,627.44

Inception date: 8/13/2021; Manager names: Brandon C. Bettencourt and Richard Munclinger

5. Strategic Advisers Core Income (FPCIX)

1-yr. net share class flow (millions): $8,352.63

YTD return: -11.8%; 1-yr. return: -12.54%; 3-yr. annualized return: -1.45%; 5-yr. annualized return: 0.89%; 10-yr. annualized return: 1.82%; YTD net share class flow (millions): $5,520.73; 3-yr. net share class flow (millions): $8,429.70; 5-yr. net share class flow (millions): $13,318.87; 10-yr. net share class flow (millions): $33,047.28; 15-yr. net share class flow (millions): $42,413.42; Net expense ratio: 0.31%; Minimum initial investment: N/A; Fund size (millions): $48,124.5; Inception date: 9/27/2007; Manager name: Jonathan Duggan

4. Fidelity Series 5+ Year Inflation-Protected Bond Index (FSTDX)

1-yr. net share class flow (millions): $9,513.94

YTD return: -13.22%; 1-yr. return: -11.57%; YTD net share class flow (millions): $2,696.06 Net expense ratio: 0%; Minimum initial investment: N/A; Fund size (millions): $8,670.89; Inception date: 8/13/2021; Manager names: Brandon C. Bettencourt and Richard Munclinger

3. Fidelity Series Long-Term Treasury Bond Index (FTLTX)

1-yr. net share class flow (millions): $9,602.96

YTD return: -23.43%; 1-yr. return: -23.95%; 3-yr. annualized return: -7.28%; 5-yr. annualized return: -0.59%; YTD net share class flow (millions): $6,853.76; 3-yr. net share class flow (millions): $10,132.90; 5-yr. net share class flow (millions): $16,008.11; Net expense ratio: 0%; Minimum initial investment: N/A; Fund size (millions): $16,493.27; Inception date: 7/7/2016; Manager names: Brandon C. Bettencourt and Richard Munclinger

2. Strategic Advisers Municipal Bond (FSMUX)

1-yr. net share class flow (millions): $10,073.45

YTD return: -10.54%; 1-yr. return: -10.41%; YTD net share class flow (millions): $7,472.45; Net expense ratio: 0.44%; Minimum initial investment: N/A; Fund size (millions): $10,906.03; Inception date: 6/17/2021; Manager name: Christopher Heavey

1. Strategic Advisers Fidelity Core Income (FIWGX)

1-yr. net share class flow (millions): $19,555.04

YTD return: -10.89%; 1-yr. return: -11.54%; 3-yr. annualized return: -0.7%; YTD net share class flow (millions): $12,928.84; 3-yr. net share class flow (millions): $38,515.38; Net expense ratio: 0.21%; Minimum initial investment: N/A; Fund size (millions): $54,300.42; Inception date: 10/16/2018; Manager name: Jonathan Duggan

The advice, recommendations or rankings expressed in this article are those of MarketWatch Picks, and have not been reviewed or endorsed by our commercial partners.

Related Posts