Edward Jones is probably wondering why it didn't get into the proprietary-mutual-fund business earlier.
The Bridge Builder Bond Fund (BBTBX), the firm's first proprietary fund, was launched Oct. 28 and promptly received $2.8 billion in inflows, according to Morningstar Inc. That's more than any other single mutual fund received during the month and twice the net inflow of the $11.7 billion Goldman Sachs Strategic Income Fund (GSZAX), the next-best-selling bond fund.
“Rarely do you see a new fund of this size,” said Mike Rawson, a fund analyst at Morningstar.
For comparison, bond superstar Jeffrey Gundlach's $33 billion DoubleLine Total Return Fund (DBLTX), widely considered to be one of the fastest-growing mutual funds ever, had just $300 million in assets at the end of its first month, according to Lipper Inc.
The Bridge Builder Bond Fund's incredible start might deserve an asterisk, though.
The assets are the result of a reallocation within Edward Jones' fee-only Advisory Solutions platform, and not a rush of new money, spokesman John Boule said,
That makes the fund’s launch similar to the hot start of the two mutual funds that had the best first month in Lipper's database. The Vanguard Total International Bond Fund (VTABX) was launched last May 2013 with $14.1 billion, and the Vanguard Total Bond Market II Fund (VTBIX), which made its debut in January 2009, collected $13.5 billion in its first month. Both of those funds were immediately added to Vanguard's massive target date funds lineup.
Mr. Boule declined to say if Edward Jones plans to reallocate more money to the fund in the future.
The fund is managed by Edward Jones affiliate Olive Street Investment Advisors and subadvised by J.P. Morgan Asset Management, Prudential Investments and Robert W. Baird & Co. Inc.
Not coincidentally, right around the time of the Bridge Builder Bond Fund's launch, the $22.3 billion JPMorgan Core Bond Fund (PGBOX), which is the same strategy as the JPMorgan sleeve of the Bridge Builder Bond Fund, had outflows of $2.5 billion, Mr. Rawson pointed out
Carlene Benz, spokeswoman for JPMorgan Funds, said the outflow from the core bond fund “reflected one client moving assets from the Core Bond mutual fund into a different vehicle with the same investment strategy managed by J.P. Morgan Investment Management” but declined to confirm the client or vehicle.
Edward Jones advisers who had their assets moved from the JPMorgan Core Bond Fund into the Bridge Builder Bond Fund have a lot to be happy about when it comes to fees. The Bridge Builder Bond Fund has an expense ratio of 0.38%, according to its prospectus, while the JPMorgan fund has an expense ratio of 0.74%.
And in today's tough environment for intermediate-term-bond funds, every basis point counts.
Intermediate-term-bond funds have been under pressure all year from rising interest rates, which move inversely to the price of bonds, and the problem has been compounded by having historically low interest rates that offer no cushion against price declines.
The JPMorgan Core Bond Fund has lost 1.56% through Oct. 13, which is 20 basis points better than the Barclays Aggregate Bond Index.
Edward Jones
announced that it was entering the proprietary-fund business in August.
Despite the dramatic start for the Bridge Builder Bond Fund, it remains to be seen if the brokerage will launch other funds.
“No other mutual funds are planned at this time, although we continue to explore areas where this might make sense,” Mr. Boule said.
