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Chart of the Week- May 16, 2022

Average performance of taxable green bond mutual funds and ETFs Jan. – April 2022Source:  Performance data:  Morningstar Direct; Sustainable Research and Analysis LLC Observations: Dedicated green bond funds, consisting of six taxable funds, including four green bond mutual funds and two green bond ETFs, reached $1.37 billion in assets under management at the end of…

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The Bottom Line:  Fixed income funds have come under increasing pressure Y-T-D and green bond funds have not been spared, but they have held up.

Average performance of taxable green bond mutual funds and ETFs Jan. – April 2022Source:  Performance data:  Morningstar Direct; Sustainable Research and Analysis LLC

Observations:

  • Dedicated green bond funds, consisting of six taxable funds, including four green bond mutual funds and two green bond ETFs, reached $1.37 billion in assets under management at the end of April.  The small segment sustained limited outflows in April on top of an estimated $47.2 million drop due to capital depreciation.  These numbers exclude the Franklin Municipal Green Bond Fund that was to be liquidated on or about May 6th and the launch of the rebranded Franklin Municipal Green Bond ETF as of May 3, 2022 that shifted $101.9 million into the green bonds segment.  
  • Fixed income funds have come under increasing pressure this year as expectations shifted for the path of monetary policy.  Green bond funds have not been spared, but they have held up well.  Taxable green bond funds (excluding the Franklin Municipal Bond Fund and its four share classes) posted an average drop of 3.34% in April that beat the Bloomberg US Aggregate Bond Index by 45 bps.    
  • Green bond funds, on average, gave up -8.98% since the start of the year.  This exceeded the total return results recorded by the conventional Bloomberg US Aggregate Bond Index, down 9.5%, by 52 bps.
  • While additional benchmarks are also relevant for relative performance evaluation purposes, such as narrowly focused green bond indices as well as global bonds in connection with funds that take on non-US dollar exposure, US bond investors will want to know how their green bond funds with investments that seek to achieve positive environmental outcomes are performing relative to an alternative conventional investment product consisting of intermediate investment-grade bonds.
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