It’s all the media’s fault, and they owe readers an apology.
It wasn’t a “taper tantrum” fueled by comments from Fed chairman Ben Bernanke that was responsible for massive bond mutual fund and ETF outflows. Rather, the financial media are at least partly to blame, according to Douglas Hodge, chief operating officer of PIMCO.
Hodge argued that net inflows to bonds “will return over the longer term.”
“In the aftermath of the financial crisis, the media—which play a large role in setting the tone of the markets and the psyche of investors—went from being cheerleaders for bonds, stressing their virtues and role in maintaining a diversified portfolio, to romancing the notion that bonds are riskier than stocks,” Hodge said in a commentary posted to the firm’s website on Monday.
“While the media may have succeeded in sullying sentiment, their message that bonds are riskier than stocks is untenable,” he added.
Hodge’s comments come on the heels of $17.7 billion in net assets that fled the company in the second quarter, according to Institutional Investor, citing research firm eVestment.
TrimTabs reported earlier in the summer that U.S.-listed bond mutual funds and exchange-traded funds lost an all-time record $61.7 billion in June.
The outflow far exceeded the previous record monthly outflow of $41.8 billion at the height of the financial crisis in October 2008.
August isn’t much better, with $30.3 billion in redemptions through mid-month, already the third-highest on record.
Unlike Hodge, TrimTabs attributed the selling to a combination of steadily rising yields and hints from global central bankers that monetary stimulus may be scaled back in the future.