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Core Bond Rebound Continued in January, But Active and Passive Not Pari Passu

The combination of rapid monetary tightening by the Federal Reserve and fear surrounding a potential economic recession wreaked havoc on fixed-income markets in 2022. Even quality spread products like the Intermediate Core Bond category endured challenges. On the surface, it was a tale of two halves for Core Bond, as flows accelerated substantially in the second half. However, passive Core Bond funds attracted all the assets during the second half, while their actively managed counterparts treaded water. Flows to actively managed Core Bond funds turned positive in January, but outperformance of passive persisted.

  • Vanguard Total Bond Market ETF (BND) gathered $14.2 billion in assets during 2022, and iShares Core U.S. Aggregate Bond ETF (AGG) gathered $4.2 billion. The two passive funds combined for $13.2 billion of inflows during the second half of the year alone. 
  • Only four actively managed Core Bond funds exceeded $1.0 billion in net sales in 2022, while six finished with greater than $500 million, led by Dimensional Core Fixed Income with $2.0 billion. American Funds The Bond Fund of America led the way in the second half with net inflows of $2.2 billion.
  • In January, BND and AGG combined for $2.3 billion in sales, continuing momentum. On the active side, only American Funds The Bond Fund of America surpassed $1.0 billion in sales while JPMorgan Core Bond Fund reached $546 million.

Intermediate Core Bond Estimated Net Flows by Active & Passive ($B)

3.7.23 Blog

Source: FUSE Research Network, Morningstar