There’s a “very uncommon development” within the mounted earnings, which is led by growth in AI bonds

The S&P 500 A profit last week has made a profit after four defeats in a row, but the market correction has led many investors to cover in bonds.

The move to bonds is not surprising this year in view of the ongoing market volatility and uncertainty about the effects of President Trump's policy and the global economy. In the world of ETFs, however, the size of the latest migration in bonds is an eye opening, whereby bond funds are taking almost as much money as equity funds.

Beat fund inflows of $ 90 billion in the past month are not far from the $ 126 billion in the amount of equity funds.

Two categories with a fixed income that were large beneficiaries of the flight for safety, actively guided nuclear funds and short-term bond funds, including the shortest US state bonds, become “ultra shorts”.

According to ETFACTION.com, over 40% of all currents have gained over 40% of the rivers in fixed income ETFs this year. Activated extended core bond funds are now active – who are trying to exceed the broad corporate bond index “, the” AGG” -have managed the lion's share of the new money from investors in their wealth class five times as much as passively, improved core bonds -ETF counterparts in accordance with ETFACTIONS.

Over the years of the bull market, when the shares raged and the Federal Reserve increased in the fight against inflation against the inflation, the classic diversified stock and bond portfolio was dead. Jeffrey Katz, managing director of TCW, says that the “60-40 portfolio” -60% bonds “again”, despite all ” Narrative about yields.

In a time of volatility of the high stock markets, “it plays as it should,” said Katz on CNBC.

However, his wet is that investors will do better by not only investing in bonds, but also breaking off the AGG and enabling an active manager such as TCW, finding better options for achieving index matching options to achieve excess returns. A place where the TCW has tried flexible Income ETF to do this is aligned with the AI ​​boom, in which bonds of 35 billion US dollars were issued to finance the construction of AI calculation centers.

“We have a fairly strong secular tailwind from the KI boom, in addition to some of the cloud storage needs,” said Katz.

The views of TCW is that the corporate credit market as a whole is “fully rated”, said Katz.

“Data centers are a new phenomenon, two years of emission related to AI and the great demand for cloud computing and computing power,” he said.

The TCW flexible Income ETF not only has overweight, but also the market bonds for single -family houses in residential areas, a market that restricts the risk of failure in the sub -offset market and in the equity of equity built into the housing stock risk. The TCW ETF has also prioritized commercial properties in the so -called class -a market, whereby the calls of the workers back to offices led the “Park Avenue Type” to see a strong rebound. “We leaned on it,” said Katz.

The most frequently used bond benchmark remains the AGG, the old bond index of the old Lehman Brothers, which is now the Bloomberg Barclays Agregate Bond Index, and the long-term, actively managed strategies in shares and bonds have tried to outperform the indices. However, Katz said that the active approach for investors was selected in bonds, since active managers can deviate from an outdated AGG approach to represent the bond market, whereby up to 26 trillion US dollars in bond market opportunities that the AGG never touches does connect the opportunities of the AGG.

Katz said that the TCW flexible Income ETF had exceeded the AGG by almost 500 basis since it was founded in 2018, with a return of 6.51% compared to 1.82% for the AGG.

“The Indices are old and do not represent how we act today, “said Alex Morris, Chief Investment Officers at F/M Investments.” There have been three decades, “he said about” Etf Edge “.

“Bond indices are bloated with tens of thousands of emissions, “said Morris.” The AGG is so large that it is indefinite. “

Ultra short options for inflation and uncertain times

At F/M Investments there is a different way, as the Bond team wants to attract investors who are looking for a safe port. Investors have shares skiing, but have too much in cash, said Morris, with over 7 trillion US dollars of money market funds and over 18 trillion US dollars sitting in bank deposits, “not even CDs,” he said.

F/M investments offer access to short-term government bonds such as the Tbil ETFAnd recently an ultra-short ETF, the ultrasric-inflation-protected security ETF, concentrated on protected securities, which are also referred to as “tips”.

Morris said the risk of investors with bond duration in times of uncertainty and may not provide the security that investors are looking for of fixed income. One reason why his company focuses on shorter permanent bonds.

Guidelines such as tariffs are naturally inflationary, said Morris, “until they become depression”.

“You can destroy growth in a way that we don't want to think about,” he added.

Since investors are more concerned about inflation – the expectations of inflation rose again, although the Fed said they expect the effects of tariffs “fleeting”, “we like it to stay short and fluid,” said Morris.

This means that treasury problems are no longer more than two-year and five-year bonds in which “they do not have to worry about aging and not well”.

Tips, he says, are “a dirty term for many people”, but tips with ultra-sorting duration are not a area of ​​the bond market that was represented in the bond fund area and can restrict some of the risks that investors violate the recent inflation history.

The short duration bonds are linked to CPI (the consumer price index) and reset every month to reflect inflation. Investors did not get what they expected from tips in the recent past, said Morris because they bought the wrong asset at the wrong time. “People buy when they see inflation and so they are burned … Then the Fed hikes wanders, and that is the duration of lasting,” he said. “Still short -term tips, even two to three years, were absolutely smoked.”

The new F/M ETF contains tips with 13 months or less up to maturity and an average duration “well under one year”, according to the company.

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