August 15, 2014 / 1:36 PM / 3 years ago

Fitch: High-Yield ETF Outflows Surge as Risk Appetite Shifts

(The following statement was released by the rating agency) NEW YORK, August 15 (Fitch) 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. Contact: Bill Warlick Senior Director Macro Credit Research +1-312-368-3141 Robert Grossman Managing Director Macro Credit Research +1-212-908-0535 Kellie Geressy-Nilsen Senior Director FitchWire +1 212 908-9123 Fitch Ratings, Inc. 33 Whitehall Street New York, NY 10004 Media Relations: Brian Bertsch, New York, Tel: +1 212-908-0549, Email: brian.bertsch@fitchratings.com. Additional information is available on www.fitchratings.com RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. Applicable Criteria and Related Research: High-Yield ETFs (Increased ETF Volume as Bond Trading Slows) here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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