March 2, 2016 / 4:05 PM / in 2 years

U.S.-based junk-bond mutual funds net first cash since November: ICI

NEW YORK (Reuters) - Mutual fund investors charged back into the riskiest debt in the latest week, according to data released Wednesday by the Investment Company Institute (ICI), delivering high-yield bond funds their first weekly inflows since Nov 4.

Junk bond funds took in $1.4 billion during the latest week, according to ICI, ending a 15-week streak of outflows that swallowed $28.8 billion of the funds’ cash and precipitated the December collapse of Third Avenue’s Focused Credit Fund.

“Investors favored taking on credit risk through high-yield funds, breaking a long weekly drought that dates back into 2015,” said Todd Rosenbluth, who directs mutual-fund research at S&P Global Market Intelligence.

Investors’ appetite for risk powered a rebound for stock funds, too. U.S.-based equity funds took in $4.4 billion during the week that ended Feb 24 as markets rallied back from flat 2015 returns and a volatile start to the year.

Funds focused on domestic stocks added $2.1 billion in new cash, while international stock funds took in $2.3 billion, their eighth week of inflows, ICI data showed.

“Developed international and U.S. large cap demand drove overall equity flows higher as investors shifted back as the equity markets moved higher in late February,” said Rosenbluth.

Overall, bond funds swung to outflows during the week. Taxable bond funds lost $1.1 billion to withdrawals as the highest-quality corporate issuers took a hit. Investment-grade bond funds lost $1 billion to withdrawals during the week, ICI said.

Investors again dismissed global bond funds based in the United States, delivering those funds their 31st consecutive week of outflows, a streak that took $49.2 billion from the funds. Global bond funds lost $2.2 billion in outflows during the latest week, according to ICI, a mutual fund trade organization.

Safe-haven taxable-government and municipal-bond funds continued their 11-week and 21-week respective streak of inflows. Taxable-government bond funds took in $793 million during the week, while investors added another $1 billion to muni funds.

Reporting by Trevor Hunnicutt; Editing by Nick Zieminski

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