May 8, 2020

Fund Investors Rally Around Corporate Investment-Grade Debt Funds

by Pat Keon, CFA.

Funds in Lipper’s corporate investment-grade debt peer groups (including both mutual funds and ETFs) took in $6.63 billion of net new money for the fund-flows week ended Wednesday, May 6. This is the group’s third-best weekly net positive flow ever (Lipper started tracking this data in 1992) and was its fourth consecutive weekly net increase during which time it has had a total net intake of $16.8 billion.

This positive run comes directly on the heels of a COVID-19 induced six-week streak of net outflows during which the group experienced its four-worst net outflows in its history (peaking at -$38.0 billion for the week of March 25) that saw a total of $98.8 billion leave its coffers. To put these numbers in perspective, the only annual net outflow this group has ever suffered was in 2015 when it had net negative flows of $38.3 billion.

The corporate investment-grade debt funds group found its bottom in late March when the Federal Reserve announced that it would purchase corporate debt for the first time ever. On March 23, the Fed disclosed plans for its Secondary Market Corporate Credit Facility (SMMCF). The purpose of the SMMCF is to provide liquidity through the purchase of investment-grade corporate debt and ETFs that hold investment-grade corporate debt. The corporate investment-grade debt funds group started to rebound at this point, both from a fund-flows and a performance perspective. After retreating 3.68% on average during March, the group is up 2.66% since the end of the first quarter.

The majority of this week’s net inflows among corporate investment-grade debt funds were attributable to mutual funds (+$5.1 billion) while ETFs contributed $1.5 billion to the total net positive flows. On the mutual fund side of the ledger, the three largest individual net inflows belonged to Morgan Stanley Institutional Ultra-Short Income Portfolio (+$989 million), JPMorgan Corporate Bond Fund (+$437 million), and TIAA-CREF Bond Index Fund ($426 million). For ETFs, iShares Short-Term National Muni Bond ETF (IGSB, +$360 million), JPMorgan Ultra-Short Income ETF (JPST, +$328 million), and iShares Core US Aggregate Bond ETF (AGG, +$275 million) turned in the best results.

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