For Lipper’s fund-flows week ended Wednesday, September 19, its High Yield Funds peer group (including both mutual funds and ETFs) took in $967 million of net new money. It was the sixth week of net inflows in the last eight for the group and brought its net-positive flows for the quarter to $2.2 billion. If the group can hold on to these increases until the end of the quarter, it will break a string of six straight quarters of net outflows. That was the longest run of quarterly net outflows in the group’s history, accounting for total net-negative flows of $45.3 billion.
The recent net inflows into high yield funds indicate investors have had a greater tolerance for taking on more risk in Q3 than they have in the recent past. High-yield debt typically correlates more closely with equities than with other types of debt because equities carry more risk. This quarter has been a good one for equities; the Dow Jones Industrial Average and the S&P 500 Index are up 8.79% and 6.97%, respectively, for the quarter to date. And equity funds have had net inflows of $1.4 billion after seeing $9.2 billion net leave the previous quarter.
The positive flows for the high yield group this quarter have been attributable to the ETF side of the ledger, which has had net inflows of $3.9 billion. Meanwhile, high yield mutual funds have seen $1.7 billion net leave their coffers. For high yield ETFs the majority of the net inflows for the quarter have been into iShares iBoxx $ High Yield Corporate Bond (HYG, +$1.8 billion) and SPDR Bloomberg Barclays High Yield Bond ETF (JNK, +$1.2 billion). The largest net outflows for high yield mutual funds have come from AB High Income Fund (AGDAX, -$315 million).
Exhibit 1 High Yield Funds (Including Both Mutual Funds and ETFs), Quarterly Net Flows ($Bil), Q1 2017 Through Q3 2018 to Date
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.