November 17, 2017

Money Continues to Leave High Yield Funds

by Patrick Keon

The Thomson Reuters Lipper High Yield Funds peer group suffered net outflows of $4.4 billion for the fund-flows week ended Wednesday, November 15. It was the group’s second largest weekly net outflows this year, trailing only those of the week of March 15, which saw negative flows of $5.7 billion net. High Yield Funds has experienced three straight weeks of net-negative flows for total net outflows of $6.2 billion, pushing the group’s year-to-date net outflows to $17.7 billion. The group is on track for its second largest annual net outflows ever, trailing only the $23.9 billion for 2014.

Even though the funds in the High Yield Funds classification are bond funds, they correlate more with and act more like equity funds than other fixed income funds (corporate investment–grade debt, government/Treasury funds) because of the below-investment–grade risk attached to them. For comparative purposes the High Yield Funds peer group has experienced similar net outflows this year as equity mutual funds have (-$89.6 billion), while corporate investment-grade debt funds and government/Treasury products have taken in net inflows of $143.8 billion and $14.3 billion, respectively.

This past week’s net outflows in the high yield space were attributable to both mutual funds (-$2.6 billion) and ETFs (-$1.8 billion). The lion’s share of the net-negative flows for ETFs was concentrated in a couple of products: SPDR Bloomberg Barclays High Yield Bond ETF (JNK, -$947 million) and iShares iBoxx $ High Yield Corporate Bond ETF (HYG, -$649 million). The outflows on the mutual fund side of the ledger were less concentrated; nine different funds saw over $100 million each leave. The largest net outflows belonged to BlackRock High Yield Bond Portfolio (-$478 million), JPMorgan High Yield Fund (-$363 million), Rydex High Yield Strategy Fund (-$302 million), and Northern High Yield Fixed Income Fund (-$221 million).

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