There is a “very rare trend” in fixed income, led by the boom in the ia obligations

THE S&P 500 made a gain last week after Four consecutive weeks of losses for actionsBut the market correction has sent many investors covering obligations.

THE move in obligations is not a surprise given the volatility and uncertainty of the current market on the Impact of President Trump’s policies On the American and global economy this year. But in the FNB world, the size of recent migration in bonds is indicative, the bond funds taking almost as much money as the equity funds.

Bond fund entries of $ 90 billion last month are not far from the $ 126 billion taken by action funds, a “very rare” trend in the ETF world which was the starting point for the discussion between fixed income experts over last week last week CNBC “ETF Edge”.

Two fixed income categories that have been large beneficiaries of the flight to security are actively managed basic bond funds and short-term bond funds, including US treasury bills, “ultra-shorts”.

FNBs with ultra-short bonds have gained more than 40% of all flows in fixed income ETF this year, according to data from Etfaction.com. Meanwhile, actively managed to manage improved basic bond funds – which seek to surpass the wide index of companies’ obligations, ” Grab“- took the share of the new investor money lion in their asset class, five times more than the counterparts of the improved basic bond index have managed passively, according to etfaction.

For years on the bullish market, while actions raged and the federal reserve increased yields in the obligations in its fight against inflation, the classic portfolio of shares and obligations was dead. But Jeffrey Katz, CEO of TCW, said that the “60-40 portfolio” – 60% of shares and 40% of bonds – “makes its share again”, and it is still the story on yields.

During a period of high market volatility, “he occurs as it should,” said Katz on CNBC.

But his bet is that investors will do better not only by investing in bonds, but by abandoning the aggregation and allowing an active manager like TCW to find better than the index correspondence opportunities to generate excess yields. A place on TCW ETF with flexible income tried to do so is aligned with AI boom, where $ 35 billion in bonds were issued to finance the construction of AI data centers.

“We have a fairly strong secular rear wind of the AI ​​arrow, in addition to part of the cloud storage request,” said Katz.

TCW’s opinion is that the company credit market as a whole is “entirely at a price,” said Katz.

“Data centers are a new phenomenon, two years of delivery linked to AI and the major demand for power of cloud computing and calculation,” he said.

In addition to being overweight, the obligations of the AI ​​data center, the Flexible TCW Income ETF has made larger bets on the residential obligations of the unifamilial housing market, a market that underestimated and where the level of equity accumulated in the housing stock limits the risk of defect. The TCW ETF also prioritized commercial real estate in what is called the class a market, with the call of workers at the offices leading the “type of Park Avenue” to see a strong rebound. “We have looked into this,” said Katz.

The most used bond benchmark remains AGG, the former LEHMAN Brothers aggregated obligations index which is now the bond index of Bloomberg Barclays, and in the long term, the strategies actively managed in shares and bonds have struggled to outperform the signs. But Katz said that the active approach had been paid for investors in bonds, because active managers can deviate from an obsolete AGG approach to the representation of the bond market, with up to 26 billions of dollars in bond market opportunities that the AGG never affects.

Katz said that the FNB Flexible Flexible FNB has surpassed the AGG since the creation in 2018 of almost 500 base points in 2018, with a yield of 6.51% against 1.82% for AGG.

“THE The clues are old and they do not represent how we exchange today, “said Alex Morris, director of investments at F / M Investments.” That’s three decades, “he said on” ETF Edge “.

“”The bond indices are inflated with tens of thousands of emissions, “said Morris.” The aggl is so large, it is invested. “”

Ultra-short options for inflation and uncertain times

At F / M Investments, another way in which the bond team seeks to attract investors looking for a refuge is short of the fixed income market. Investors are sophisticated in stocks but have too many cash dishes, said Morris, with more than 7 billions of dollars in monetary market funds and more than 18 billions of dollars in bank deposits, “not even CDs, deposit accounts,” he said.

F / m investments offer access to short -term cash obligations, such as its TBIL ETFand recently launched an ultra-short ETF, the ETF of safety protected by the inflation of the ultrai treasurefocused on titles protected by treasury inflation, otherwise known as “advice”.

The risk that investors take with the duration of the bonds increase in times of uncertainty, said Morris, and may not offer security that investors are looking for a fixed income, one of the reasons why his business is focused on short -term bonds.

Politicians such as prices are intrinsically inflationary, Morris said: “until they become depression.”

“They can simply destroy growth in a way we don’t want to think,” he added.

While investors are concerned with inflation – inflation expectations have increased again, although the Fed said last week He expects any pricing impact to be “transient” – “we like to remain short and liquid,” said Morris.

This means that cash emissions are only two years and five years in duration, where “you don’t have to worry about aging and not exchanging well”.

Advice, he says, have become “a dirty term for many people”, but ultra-short duration advice is not an area of ​​the bond market that has been represented in the space of the bond fund and can limit some of the risks that hurt investors in recent inflation history, said Morris.

Short -term bonds are linked to the IPC (the consumer price index) and reset each month to reflect inflation. Investors did not get what they expected from advice in a recent past, said Morris because they bought the bad asset at the wrong time. “People buy when they see inflation arrive and that’s how they burn themselves … it’s at this time that the Fed hikes, and that makes you lower the assets of duration,” he said. “Advice in the short term, even two, three years old, have been absolutely smoked.”

The new ETF F / M contains advice with 13 months or less at maturity, and an average duration “much less than a year”, according to the firm.

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