High Yield and Floating Rate Funds Redemptions Hit Record Levels in Early August

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By Vittorio Hernandez | August 12, 2014 9:36 AM EST

The specter of higher rates putting pressure on corporate earnings spurred investors to redeem a record setting $11.38 billion from High Yield Bond Funds and pull over $19 billion - a 26-week high - from U.S. Equity Funds, according to the latest data from EPFR.


Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York July 14, 2014. REUTERS/Lucas Jackson (UNITED STATES - Tags: BUSINESS SOCIETY)

In a report, EPFR said the figures were good news as they showed that the biggest impact on flows for EPFR Global-tracked funds during the week ending Aug 6 as the addition of another 200,000 plus jobs in July reinforced perceptions that America's economic recovery may prompt the U.S. Federal Reserve to raise interest rates sooner than previously anticipated.

The first week of August saw investor sentiment put to the test as Russian troops massed on the eastern border of the Ukraine, Italy slipped into recession for the third time since the current financial crisis began, Portugal bailed out one of its banks and tough talk about corporate taxation on both sides of the Atlantic unsettled the financial and healthcare sectors.

Also caught up in the uncertainty about the trajectory of U.S. interest rates were Emerging Markets and Floating Rate Bond Funds, while geopolitical risks stemmed from conflicts in the Middle East and the Ukraine saw equity investors rotate from west to east. Asia ex-Japan Equity Funds posted record inflows and Australia Equity Funds enjoyed their second best week year-to-date during a week when combined redemptions from Europe and EMEA Equity Funds exceeded $2 billion.

Dr. Joseph Louro, chief executive officer of Red Bank, New Jersey-based investment education company InvestView (OTCQB: INVU) commented that the geopolitical events in Eastern Europe and parts of the Middle East and Africa would have a profound impact in the markets.

He said investors must carefully thread and understanding these events in order for them to make better business judgment.

Overall, EPFR Global-tracked Bond Funds recorded net outflows of $2.16 billion while Equity Funds surrendered $16.27 billion, a 22 week high. At least some of that money found its way to Money Market Funds which took in over $22 billion.

With the specter of higher U.S. interest rates prompting investors to reassess how much they are willing to pay for additional yield, funds dedicated to junk bonds suffered their biggest outflows on record in early August. U.S. High Yield Bond Funds bore the brunt of the outflows, with investors pulling out over $8 billion, but redemptions from Global High Yield Bond Funds hit a 13 month high and funds dedicated to European junk bonds, which have been enjoying a banner year, also recorded record outflows.

Although the current correction in High Yield Bond Fund flows has yet to run for as long as the one that started in 2Q13, which spanned the better part of five months, the amounts redeemed by investors in both cases are now roughly equal.

Louro said in the company Web site, "It is our opinion that now, more than ever before, it is critical that the individual investor come to understand the forces that influence the marketplace. We specialize in assisting common investors through this process by offering them the tools, training and confidence that is required to successfully navigate the market in these trying times."

InvestView, Inc. provides and delivers a comprehensive online program of investor education: proprietary investor search tools and trading indicators, weekly newsletters as well as access to live weekly Trading Rooms. It delivers subscription-based financial education courses through InvestView's website. InvestView also allows new retail investors to use the portal's subscribed information on a 2-week trial period for $9.95.

The company does it through its online education, analysis and application platform that provides analysis, tools, education solutions and an application. InvestView's web-based tools were designed to simplify stock research and improve the investor's research efficiency. One such tool is the Market Point, which is made up of five sections, namely: Charts, Stock Watch, Market, Calendar and Campus.

InvestView offers five training courses that provide an incredible education in the stock market. The five InvestView courses build upon each other. Beginners should take them in the suggested sequence, while more seasoned traders may jump right into the more advanced topics that they are craving to better understand and give them the edge as a successful trader. Each course is offered via live webinar and as a recorded on-demand videos that is immediately posted at the end of each webinar. For more information, please visit their Web site.

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Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York July 14, 2014. REUTERS/Lucas Jackson (UNITED STATES - Tags: BUSINESS SOCIETY)
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