US taxable bond funds record largest 2016 withdrawals

20 Jun, 2016

Investors pulled $3.1 billion from US-based taxable bond funds in the week that ended June 15, Lipper data showed on Thursday, delivering funds that have been popular this year their largest withdrawals since December. The result came as high-yield bond funds ended a two-week period of inflows and posted $1.8 billion in outflows over the week, the data showed. Emerging-market debt and Treasury funds recorded more modest outflows of $107 million and $167 million.
Both mutual funds and exchange-traded funds suffered bond outflows, the data showed, as worries persist that Britain may leave the European Union after a June 23 referendum, also known as "Brexit."
"I don't think it's going to cross the pond that dramatically, but investors can be positioning away from riskier assets with this event that has a special date on the calendar," said Todd Rosenbluth, director of exchange-traded and mutual fund research at S&P Global Market Intelligence.
The high-yield market typically moves in sympathy with equities, which saw the Standard & Poor's 500 come under severe selling pressure in the last five days ended Wednesday.
By contrast, corporate investment-grade funds - from higher-credit issuers - attracted their 15th straight week of inflows, $499 million.
Stock funds also sank, with investors pulling $3.4 billion from those listed in the United States, the data showed, adding to a selloff of the funds that has lasted most of this year.
Those came as healthcare and biotechnology sector funds posted $531 million in outflows, their first withdrawals in a month, as some prominent drugs failed in trials and troubled Canadian drugmaker Valeant Pharmaceuticals International Inc continued to weigh on the sector.
Financial-sector funds, now less likely to get a US Federal Reserve rate hike that could boost banks' net interest margins, posted $363 million in outflows.
Non-domestic-focused stock funds posted $2 billion in withdrawals after taking in $1 billion the week before. Both developed and emerging markets funds fell out of favour.
European stocks funds - perhaps most directly affected by a Brexit vote - posted $248 million. The funds have now recorded negative results in 19 of the last 20 weeks.

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