Last week saw very little change in fund flows but with some modest increases to Russell’s Semi Government ETF, Vanguard’s Fixed Interest Index ETF and Betashare’s High Interest Cash ETF. Russell’s Government Bond ETF suffered a small out flow.
Icahn attacks BlackRock
US hedge fund activist Carl Icahn launched a broadside last week at Black Rock, saying the world’s dominant bond participant was complicit in pushing the yields of bonds to record lows. Icahn believes the US corporate bond market is in bubble territory and players such as Black Rock are adding fuel to the fire by marketing bond ETFs to yield-hungry investors. Icahn fears that US yields are too low and when interest rates do rise, a ‘rush for the exits’ will create a liquidity crisis as there are fewer bond market makers as a result of regulatory changes. He is not alone in this view as several Australian Reserve Banks officials and ‘Bond King’ Bill Gross have commented on this lack of liquidity over the last 12 months.
Icahn’s main concern and the reason for his attack on Black Rock, is his belief the “high yield” ETF markets will prove illiquid and there will be “nobody to buy this stuff”.
ASX CASH & BOND ETFs*
|1m (%)||1y (%)||MER (%)||FUND
|BetaShares Aust High Int Cash||AAA||50.15||0.23||3.10||0.18||706.08|
|SPDR S&P/ASX Aust Bond||BOND||25.83||-1.05||5.71||0.24||15.63|
|SPDR S&P/ASX Aust Govt Bond||GOVT||25.58||-1.11||5.88||0.22||5.15|
|iShares Composite Bond ETF||IAF||104.60||-0.93||5.45||0.24||191.67|
|iShares Treasury ETF||IGB||101.90||-1.15||5.51||0.26||16.01|
|iShares Govt Inflation ETF||ILB||113.04||-1.72||6.22||0.26||33.23|
|Russell Aust Select Corp Bond ETF||RCB||20.33||-0.55||3.84||0.28||79.50|
|Russell Aust Govt Bond ETF||RGB||21.02||-1.26||6.86||0.24||132.29|
|Russell Aust Semi-Govt Bond ETF||RSM||20.66||-0.61||5.03||0.26||125.90|
|Vanguard Aust Fxd Int Index ETF||VAF||49.45||-0.93||5.47||0.20||209.97|
|Vanguard Aust Govt Bond Index ETF||VGB||48.65||-1.02||5.68||0.20||49.26|