Investors pull $2.37B more from US high-yield funds; YTD outflow hits $17.6B

Even as risk-sentiment proxies showed signs of healing at quarter-end after a downdraft from the mid-month banking crisis, investors withdrew $2.37 billion more from US high-yield retail funds over the week to March 29, marking outflows now for seven straight weeks and in nine of the last 10 weeks, per Morningstar.

The four-week rolling average has run in the red now for eight straight weeks, and in 11 of the 13 weeks so far this year. That average was negative $1.25 billion through March 29, versus negative $1.07 billion a week earlier. The deepest reading in the red this year was negative $3.08 billion for the four weeks to March 8, a period that included the heaviest concentrated outflows since the onset of the pandemic in March 2020.

Year-to-date net flows are negative $17.6 billion, including $18.4 billion pulled from the funds over the last 10 weeks.

Last year, outflows totaled $23.4 billion for the comparable YTD period, on the way to $29.7 billion of net outflows for the full year. Outflows were $4 billion in 2021, which marked the start of a long deflation in fund levels following on big inflows of $40.5 billion in 2020, and $24.6 billion in 2019.

The latest weekly reading reflects outflows of $1.77 billion from high-yield ETFs, and $599 million from mutual funds. Both categories are in the red for the year, though YTD outflows are far heavier for ETFs (negative $11.9 billion) than for mutual funds (negative $5.7 billion). Last year, outflows skewed heavily to mutual funds (negative $25.2 billion) relative to ETFs (negative $4.5 billion).

When valuing the total net assets at the funds, modest market-based gains over the latest week only partially offset the $2.37 billion of outflows. Morningstar valued the assets across high-yield funds at $227.3 billion as of March 29, down $2.1 billion week-over-week, and at a low since last October. That valuation has now dropped $20.6 billion from the high 2023 reading, on Jan. 18, and it compares with $299 billion at the start of 2022, and $266.5 billion at this same point last year. The 2022 low was recorded on Sept. 28, at $220.1 billion.

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