In an article for Bloomberg, Ye Xie and Liz McCormick discussed how Vanguard’s fixed income ETFs have been major recipients of inflows as investors look to take advantage of higher yields and protect their portfolio from a potential recession later this year.

In March, the funds saw $26 billion of inflows due to the crises at Credit Suisse and Silicon Valley Bank. This was nearly more than last year’s cumulative $31 billion of inflows. 

It’s also an indication that Vanguard’s passive management and indexing strategies will take on even greater significance in the fixed income world as these funds keep growing. In total, Vanguard’s fixed income funds have over $1 trillion in assets. 

It also follows what has happened in equity markets, where passive funds have ballooned in size, and make up the bulk of inflows. In hindsight, the 2008 financial crisis and subsequent few years seem to have been the trigger for equity investors favoring passive funds over active ones due to the strong outperformance of indexes. 

Similarly, 2022 was the biggest rout for bonds in decades due to inflation and a hawkish Federal Reserve. This also has led to investors rethinking allocations, and one outcome has been the growth of passive over active. 

Finsum: Similar to what happened in equities over the last decade, passive bond funds are starting to see the bulk of inflows.