A $10 Billion ETF Is Smashing Records Amid the Junk-Bond Binge
A $10 Billion ETF Is Smashing Records Amid the Junk-Bond Binge
(Bloomberg) -- As negative yields engulf everything from Brazil’s state oil company to Hungarian sovereign debt to euro junk, investors are seeking refuge in high-yield bond ETFs.
Europe-listed funds have attracted over 5 billion euros ($5.6 billion) since January, more than in any full year going back to at least 2010, according to data compiled by Bloomberg Intelligence. The largest exchange-traded fund tracking the debt -- BlackRock Inc.’s 8.5 billion-euro IHYG -- took in 640 million euros in the week ended July 5, smashing a record it set just two weeks before, the data show.
“With interest rates falling globally, investors are searching for streams of income and finding them through high-yield products, given there are limited alternatives out there,” said Todd Rosenbluth, head of ETF and mutual fund research at CFRA Research.
Fresh dovish rhetoric from the Federal Reserve and the European Central Bank have intensified the clamor for yield. With nearly $13 trillion of global debt yielding less than zero, investors are moving down the credit spectrum in their quest for return. A U.S. junk-bond fund attracted record cash in June.
Policy makers have depressed yields so much that even some European high-yield bonds trade at levels where investors have to pay for the privilege of holding them.
Yield-thirsty investors are increasingly choosing passive vehicles as they wade into speculative-grade securities. ETFs trade like listed stocks, allowing investors to dip in and out of bets in real time as opposed to enduring the glacial pace of over-the-counter trading in eurozone cash bonds.
ETFs “dominate’’ European high-yield bond flows this year, accounting for over 60% of new cash, according to JPMorgan Chase & Co. The securities handed investors 8.1% in the first half of the year, the best performance since 2012.
To contact the reporter on this story: Marianna Aragao in London at mduartedeara@bloomberg.net
To contact the editors responsible for this story: Sarah Husband at shusband@bloomberg.net, Yakob Peterseil, Cecile Gutscher
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