The Financial & Risk business of Thomson Reuters is now Refinitiv

All names and marks owned by Thomson Reuters, including "Thomson", "Reuters" and the Kinesis logo are used under license from Thomson Reuters and its affiliated companies.

January 12, 2018

Investment-Grade Corporate Debt Funds Continue to Prosper

by Patrick Keon.

by Patrick Keon.

After capturing near-record-setting annual net inflows in 2017 (+$164.8 billion) the Thomson Reuters Lipper investment-grade corporate debt funds macro-group took in $3.0 billion of net new money for the fund-flows trading week ended Wednesday, January 10, 2018, marking the thirty-second consecutive weekly net inflows for the group and its largest since the fund-flows week ended March 27, 2017 (+$3.7 billion). The investment-grade corporate debt funds macro-group had net inflows for 57 of the last 58 weeks.

The group thrived in 2017, taking in its second largest ever annual positive net flows, trailing only the $171.8 billion of net inflows for 2009. Investment-grade corporate debt funds accomplished this feat in an environment in which the Federal Reserve raised interest rates three times during the year and the credit spreads for investment-grade bonds continued to tighten. The BofA Merrill Lynch US Corporate BBB option-adjusted spread narrowed for eight consecutive quarters to close 2017 at 1.28%, the smaller the spread the more attractive riskier assets are. Despite this prolonged contraction (a total of 113 basis points since its recent high of 2.41% at the end of 2015), investors continued to pump new money into investment-grade corporate debt products.

Three Lipper peer groups dominated the net inflows for 2017: Core Bond Funds (+$83.0 billion), Core Plus Bond Funds (+$26.8 billion), and Ultra-Short Obligation Funds (+$22.0 billion). At the fund level the two largest net inflows went into products in the Core Bond Funds category: Vanguard Total Bond Market II Index Fund (+$30.0 billion) and Vanguard Total Bond Market Index Fund (+$13.4 billion). The largest annual positive net flows for Core Plus Bond Funds belonged to Prudential Total Return Bond Fund (+$9.3 billion). Morgan Stanley Institutional Ultra-Short Income Portfolio (+$5.1 billion) recorded the largest gain in the Ultra-Short Obligation Funds peer group.

Article Keywords

Get In Touch