Funds Flowing Into Ultrashort Bond Funds Again

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Investors are coming back to ultrashort bond funds according to Morningstar.

It appears there have been $9 billion of net inflows year to date, with funds run by firms such as PIMCO, Goldman Sachs, Federated, and Franklin seeing the majority of flows.

Unfortunately the public Morningstar piece below is a bit short on detail.

Regardless, it makes sense that investor interest would be returning to this class of funds.

Shorting bonds is another way to bet on dollar devaluation and high inflation, even if past concerns regarding ultrashort funds make these investments far from ideal.

This could signal the beginning of a higher degree from risk aversion from investors.

Morningstar: But more investors have been coming than going so far in 2009 (to the tune of $9 billion). Why the change of heart? For starters, as the Fed has kept its target rate near zero and other short-term rates have followed suit, you’re lucky to get a yield of mere fractions of a per cent in a money market fund. By comparison, the monthly SEC yield on ultrashort-bond funds is in the 1% to 3% range.

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