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Investors Continue To Shy Away From Below-Investment-Grade Debt Funds

Mutual fund investors have been voting with their wallets on lower-quality bond funds. Funds in Thomson Reuters Lipper’s High Yield Funds and Loan Participation Funds classifications have seen their coffers shrink on a fairly consistent basis since the second half of last year. The net outflows for each have intensified as of late; High Yield Funds has suffered negative flows in 14 of the last 15 weeks (-$17.5 billion), and Loan Participation Funds is currently in a downward spiral of 22 consecutive weeks of net outflows (-$14.4 billion). This recent activity is the continuation of a longer-term trend; High Yield Funds has not experienced a positive annual net inflow since 2012 (+$21.1 billion), while Loan Participation Funds last took in net new money on an annual basis in 2013 (+$57.4 billion). During this latest run the largest net outflows among the high-yield fund universe belonged to some of the more well-known names in the field. The Ivy High Income Fund (MUTF: IVHEX ) (-$1.3 billion), the American Funds American High-Income Trust (MUTF: AHIFX ) (-$1.1 billion), and the PIMCO High Yield Fund (MUTF: PHLPX ) (-$1.0 billion) all saw over a billion dollars leave the fold. Trailing slightly behind this lead group were the BlackRock High Yield Bond Portfolio (MUTF: BHYAX )(-$911 million) and the JPMorgan High Yield Fund (MUTF: JHYUX ) (-$709 million). Similar to the high-yield fund universe, the most significant net outflows for loan participation funds over the most recent tracking period have been concentrated in a handful of funds. Since the start of the fourth quarter of last year there have been four funds whose negative flows have been significantly greater than the rest of the universe: The Oppenheimer Senior Floating Rate Fund (OOSA) (-$2.0 billion), the Fidelity Advisor Floating Rate High Income Fund (MUTF: FFRHX ) (-$1.3 billion), the RidgeWorth Seix Floating Rate High Income Fund (MUTF: SAMBX ) (-$1.1 billion), and the Eaton Vance Floating-Rate Fund (MUTF: EVBLX ) (-$960 million). Click to enlarge

Lipper U.S. Fund Flows-February 3, 2016

By Tom Roseen Did we just see mutual fund investors turn on a dime? After yanking nearly $5 billion from their accounts the previous week, this past week’s data show estimated net flows of $2.1 billion into equity mutual funds-for their first positive flows week this year. Although the benchmark Dow Jones Industrial Average was up for the week, the scant 392 points probably wasn’t as important as a rising sentiment that 16,000 is as good a floor as any we’ll find in this market. But count equity exchange-traded funds’ (ETFs’) authorized participants among the unconvinced: they withdrew about $8.5 billion (net), backing out of the SPDR S&P 500 Trust ETF ( SPY , -$3.2 billion ) and the iShares Russell 2000 ETF ( IWM , -$1.2 billion ) , but they made modest contributions to the SPDR Gold Trust ETF ( GLD , +$758 million ) . Taxable bond mutual funds suffered their thirteenth weekly net outflows (-$523 million), but the week’s magnitude was the lightest yet. The Loan Participation Funds classification (-$333 million) notched its twenty-eighth consecutive week of outflows from mutual fund investors and High Yield Funds suffered outflows of $108 million as investors kept a wary eye on the junk sector. On the other hand, bond ETFs collected $671 million of inflows as the week’s biggest individual bond ETF inflows belonged to the iShares 7-10 Treasury Bond ETF ( IEF , +$412 million ) , while the iShares iBoxx $ Investment Grade Corporate Bond ETF ( LQD , -$423 million ) led the outflows list. Municipal bond mutual fund investors added $585 million to their accounts while the muni market gained 0.48% for the week-after the previous week’s little tumble. Money market funds saw outflows of $3.8 billion this past week, of which institutional investors pulled $4.2 billion and retail investors redeemed $400 million.