NEW YORK--(BUSINESS WIRE)--A sharp reversal in investor risk appetite over the past month has triggered a significant shift in high-yield exchange-traded fund (ETF) investment flows, contributing to an 11% decline in assets since July 11, according to Fitch Ratings.
Our analysis of the top 10 high-yield bond ETFs, based on Bloomberg data, indicates that aggregate fund outflows totalled $3.5 billion over the four-week period between July 11 and August 8, with investment inflows seen on only 4 of 21 trading days during that period. The $3.5 billion outflow figure tops the largest rolling four-week outflow total of $3.1 billion during the "taper tantrum" in May and June of 2013.
A surge in redemption activity has driven most of the drop in high-yield ETF assets since early July, with average net asset values (NAVs) falling modestly. Between July 11 and August 8, total assets for the 10 high-yield ETFs we studied fell from $36.5 billion to $32.7 billion.
In contrast to the heavy bond ETF trading period last year, when both high-yield and investment grade funds reported sharp rises in volumes, the recent spike in activity has been seen only among high-yield ETFs. During the week ended August 1, high-yield ETF trading volume exceeded investment grade by $4.1 billion. This was about four times the average spread in trading activity between the two categories during our study period, which began at the start of 2013.
High-yield ETFs have grown in importance as trading vehicles for fixed-income investors, particularly since May 2013, when the Fed first began discussing the likelihood of a tapering of quantitative easing. Growth in high-yield ETF volumes has outpaced growth in underlying bond trading volumes this year.
For a detailed review of changes in high-yield ETF trading activity since early 2013, see the special report "High-Yield ETFs (Increased ETF Volume as Bond Trading Slows)" dated May 8, 2014, at www.fitchratings.com.
Additional information is available on www.fitchratings.com
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High-Yield ETFs (Increased ETF Volume as Bond Trading Slows)
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748050
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