Gang Hu, managing partner at Winshore Capital Partners, which specializes in inflation-protected investments, said passive funds, particularly those run by Vanguard and BlackRock, have become so big and influential that he keeps a spreadsheet tracking their daily flows. The firm’s more than 90 US index-tracking bond ETFs have taken in over $100 billion in the past year, according to data compiled by Bloomberg, more than any other firm. “We’re dealing in a market that forces us to take some active positions.”īeyond Vanguard, the other big beneficiary of the shift from active to passive in fixed income has been BlackRock Inc. “We have to be, by definition, overweight some places and underweight others to build a sample,” Barrickman said. That means many of the decisions he makes, like which bonds to buy when trying to replicate his funds’ underlying benchmarks, can have big consequences for the market (the Vanguard Total International Bond Index Fund, for example, only holds roughly half the 13,000 bonds in the index it tracks.) They now account for 31% of the fixed-income fund universe, the data show, up from just 13% a decade ago.īarrickman himself now oversees three of the world’s four largest bond funds, including the $298 billion Vanguard Total Bond Market Index Fund, according to data compiled by Bloomberg. Passive funds lured $279 billion in new cash, while active funds bled $757 billion.Īs of March, assets managed by passive funds surpassed $3 trillion for the first time. The gap between passive and active net flows reached a record $1.04 trillion in 2022, almost triple any other year, according to data from EPFR. ![]() The dramatic losses in debt markets last year, fueled by the most aggressive Federal Reserve policy tightening in a generation, has turned what was once a relatively slow and steady shift away from active bond funds and toward passive products into a stampede. Created decades ago, their popularity ballooned following the 2008 financial crisis, fueled in part by skepticism of active money managers after stocks cratered.īut history is repeating. “Tracking is job one, two and three,” he said, adding “if we can have a basis point a year, that’s a lot of real money.”Įquity investors have been shifting to passive index products for years. “We do have size and scale, and that matters in the marketplace,” Barrickman said in an interview. No longer dominated by traders making multimillion-dollar bets and eating what they kill, the real money is flowing to guys like him, whose decisions are increasingly rippling through markets. That makes Barrickman exhibit A of a passive management revolution that’s reshaping the world of fixed-income, just as it did equities a decade ago. In fact, he now controls nearly as much US debt - including Treasuries, agency and corporate bonds - as China, America’s second-largest foreign creditor. The soft-spoken 47-year-old’s funds lured $31 billion last year, even as active managers posted unprecedented outflows amid the worst year for bonds since at least 1977. There’s nothing vanilla about the money he’s pulling in, though. He runs Vanguard Group Inc.’s $1 trillion bond indexing business for the Americas, a class of investing that - to the outside world, at least - is as vanilla as it gets. He doesn’t even have a view (at least that he’s willing to share) on what the Federal Reserve will do next. Yet Barrickman didn’t predict Silicon Valley Bank’s collapse, or Credit Suisse’s tortured final days. His army of funds gained roughly $26 billion, the equivalent of more than $1 billion in paper profits every single trading session. Goldman to Pay $215 Million to End Case on Underpaying Women Steve Schwarzman Holds Off Giving Money to DeSantis After Meeting Him ![]() Italy Intends to Exit China Belt and Road Pact as Relations Sour Trump Liable for Sex Abuse, Must Pay $5 Million to Carroll Vanguard’s Trillion-Dollar Man Leads a Fixed-Income Revolution ![]() You never hear the term “lifetime capo,” but I am pretty sure if one exists it is made by the folks at Elliott Capos.(Bloomberg) - When March’s bank failures ignited a historic bond rally, few, if any, made more money than Josh Barrickman. They even make capos for banjos as well and all of the capos they make are made in the US. Make sure to check these guys out, and keep in mind that these are pricey buggers, but I can honestly say after having one for almost ten years now, they are very much worth it. This small shop of family members makes the most finely machined stainless steel capos in a variety of styles and finishes. Well, I am sad to report my playing didn’t transform, however, I found one of the most quality capos I have ever had the pleasure of using. I first heard of these capos from Dave Grier’s website, and I thought for sure upon purchasing one my playing was going to transform. Not necessarily so, in fact, the fine folks at Elliott capos will tell you different.
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