As bond prices tumbled for a second straight week, investors pulled $3.73 billion from US high-yield retail funds for the week to Feb. 15, or the largest exit from the space since the last week of August 2022, per data from Morningstar.
The funds, which reported a $703 million inflow last week, have now posted outflows in three of the last four weeks. The four-week rolling average moved to negative $1.25 billion, from negative $288 million through the previous week.
The funds have shed a net $4.15 billion of investor assets for the year to date, net of four weekly outflows and three positive readings. That builds on outflows of roughly $30 billion in 2022 and $4 billion in 2021, as the pendulum swings from nearly $41 billion of inflows in 2020.
Meantime, a combination of investor withdrawals and down markets produced the largest week-over-week drop in the value of the total net assets at the funds since September 2022. Morningstar valued those assets at $239.3 billion as of Feb. 15, down $6.5 billion week over week, and versus a 2023 high at $248 billion on Jan. 18. The funds were valued at $274.5 billion at this point last year, and $299 billion at the start of 2022. Last year’s low came at the end of the third quarter, at $220 billion.
ETFs, which account for 27% of the overall high-yield fund pool, again absorbed the brunt of the latest move. The $2.66 billion outflow from ETFs for the week to Feb. 15 marked the biggest exit since the week to Aug. 24, 2022. It was also the third ETF outflow in the last four weeks, as outflows from the category YTD (negative $3.31 billion) race ahead of outflows from mutual funds YTD (negative $844 million, on net). Mutual funds in the latest week posted an outflow of $1.1 billion, following back-to-back modest inflows.
The patterns this year mark a change from 2022, when outflows from ETFs (negative $4.5 billion) were far less severe than those from mutual funds (negative $25.3 billion). In the fourth quarter of 2022, ETFs attracted $14.1 billion of investor funds amid a tentative risk-on rally, as outflows (of more than $2 billion) continued from mutual funds.
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