As high yield bonds recovered all of their losses from the September downturn the following month, so did the fund flows, nearly. After net outflows of €2.5bn in September, investors poured money back into the asset class in October according to data provided by Morningstar. Global and European high yield proved most popular, with both recording around €1bn in net inflows. USD high yield bond funds, however, saw net outflows in excess of €0.5bn.
The recovery cannot have been all that surprising, since high yield bonds are the only fixed income asset class with significant scores of fans across the continent. Though the asset class is not universally loved, it offers decent yield prospects and is expected to profit from continued monetary easing by the ECB. Therefore, fund selectors clearly prefer high yield bonds over investment grade bonds, which continued to see net outflows in October.
The other category of risky bonds, emerging market debt, has been out of favour with investors for a while, presumably making it easier for high yield bond funds to attract the inflows. In October, emerging market bond funds saw net outflows of €611m. However, this was a big improvement from a month earlier, when net redemptions of €4.2bn were recorded. So, provided China keeps its skeletons in the closet for now, there might be some light at the end of the tunnel.
Click here to see a full overview of recent fund flows for all asset classes.