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

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Includes: AHIFX, BHYAX, EVBLX, FFRHX, IVHEX, JHYUX, OOSAX, PHLPX, SAMBX
by: Lipper Alpha Insight

By Patrick Keon

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).

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