Fund Investors Put Money into Riskier Assets

For the fund-flows week ending Wednesday, April 1, the Corporate Debt-High Yield Funds group (including both mutual funds and ETFs) took in $7.1 billion of net new money. This represents the group’s largest ever one-week net inflow, significantly besting the $5.0 billion increase during the week of March 2, 2016 (Lipper began tracking this data in 1992).

This week’s record-setting result happened during a time in which there is still much uncertainty and volatility in the markets and on the heels of six consecutive net outflows for the group during which it had total net negative flows of $19.2 billion. Included in this six-week downturn were the fourth and fifth highest net outflows ever for high-yield corporate debt funds, which took place during the weeks of March 4 (-$5.1 billion) and March 11 (-$4.9 billion). Conversely, the Corporate Debt-Investment Grade Funds group had net outflows of $8.5 billion this week, the group’s fifth straight weekly net negative flows.

Following suit were funds in the Municipal Debt-High Yield Funds group. This tax-exempt below investment-grade debt group had net inflows of $280 million this week. This positive result was preceded by four consecutive net outflows (for a total of -$11.5 billion), including the group’s two largest net negative flows in its history—of $5.3 billion and $4.3 billion—for the fund-flows weeks of March 18 and March 25, respectively. Muni debt funds as a whole saw $749 million leave their coffers this week, with the only other peer group (including both the national muni debt and single-state muni debt classifications) to take in net new money being General Muni Debt Funds at $39 million.

There is speculation that last week’s $2.2 trillion stimulus package has created a bottom for the markets. With corporate high-yield debt funds and muni high-yield debt funds down 14.1% and 9.1%, respectively, for the year to date, the time to buy is now before the rebound for these groups starts in earnest. Funds which benefitted the most from this last week on the corporate bond fund side of the ledger were the BlackRock High Yield Bond Fund and the SPDR Bloomberg Barclays High Yield Bond ETF (JNK), which took in $2.1 billion and $1.5 billion of net new money, respectively. For high-yield muni debt funds, the Nuveen High Yield Municipal Bond Funds paced the net inflows at $726 million.