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High-Yield Bond Mutual Fund Flows: An Update

By Sean Collins

December 23, 2015

In an ICI Viewpoints on December 16, we debuted new weekly data on flows to high-yield bond mutual funds, presenting data through December 9. In light of continuing developments in the high-yield market, we have had requests to provide an update this week, taking into account the flows through December 16. Here is our overview.

Recent Aggregate Flows in High-Yield Bond Funds

For the week ended Wednesday, December 16, we estimate these funds saw outflows of $5.8 billion, following outflows of $4.6 billion for the week ended December 9. We have posted historical data on weekly flows to high-yield bond funds since January 6, 2010, on our website.

Based on weekly data, we estimate that outflows from high-yield bond funds have totaled $15.2 billion over November and December (through December 16). That amounts to 4.3 percent of assets of high-yield funds at the end of October 2015.

The chart below plots monthly flows in high-yield bond funds (excluding floating-rate funds) as a percentage of assets since 2000. The size of the November–December outflows from high-yield bond funds is not unprecedented. For example, outflows were of a similar magnitude during the two month period July–August 2014 (4.6 percent of their June 2014 assets) and three months June–August 2011(4.4 percent of their May 2011 assets).

High-Yield Bond Fund Flows as a Percentage of Previous Month Assets
Net new cash flow as a percentage of previous month-end assets; monthly, January 2006–November/December 2015*

*Data exclude high-yield funds designated as floating-rate funds, except for the estimate for November–December 2015. The November–December 2015 estimate is based on weekly estimated flows to all high-yield funds, divided by October 2015 assets in all high-yield funds. This treatment is necessary because ICI’s data on weekly flows do not compile flows for floating-rate high-yield funds separately from other high-yield funds.

Source: Investment Company Institute

Sean Collins is senior director, industry and financial analysis, at ICI.

TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading

High-Yield Bond ETFs: A Source of Liquidity

By Shelly Antoniewicz

December 22, 2015

The high-yield bond market has been buffeted recently, as market participants reassessed the risks of this sector and sent prices for many such bonds tumbling.

Read more…

TOPICS: Bond FundExchange-Traded FundsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading

High-Yield Bond Mutual Fund Flows: Some Perspective

By Sean Collins

December 16, 2015

Recent conditions in the high-yield credit markets have raised questions about the impact of market turmoil on mutual funds investing in that segment of the bond market.

Read more…

TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityInterest RateMutual FundTrading

The First Move: MSRB Issues a Proposal for Shortened Settlement Cycle

By Marty Burns

December 8, 2015

Recently, the Municipal Securities Rulemaking Board (MSRB) opened the door on the regulatory filings needed to move the U.S. securities markets to a shortened settlement cycle.

Read more…

TOPICS: BondsFinancial MarketsFinancial StabilityFund RegulationOperations and Technology

Traders, Start Your Engines: After August 24, Exchanges Need to Coordinate

By Jennifer Choi and George Gilbert

November 30, 2015

The extraordinary volatility in U.S. equity markets on August 24, 2015, exposed a significant deficiency in the rules governing these markets’ structure: a lack of harmonization across securities exchanges for reopening trading after a “limit up–limit down” trading halt in a security.

Read more…

TOPICS: Equity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund Regulation

Mutual Fund Investments in Private Placements: an Overview

By Gregory M. Smith

November 23, 2015

Given recent media interest in mutual fund investments in private placements, it might be helpful to review mutual fund disclosure and valuation obligations. How do funds handle securities that are not publicly traded?

Read more…

TOPICS: Bond FundEquity InvestingFund GovernanceFund RegulationInvestment EducationMutual FundOperations and TechnologyTrading

U.S. Bond ETFs Resilient on August 24

By Shelly Antoniewicz

November 20, 2015

Some observers have suggested that equity market volatility on August 24, 2015, spilled over into other markets and products, in particular to bond exchange-traded funds (see, for example, Bank of England Financial Stability Paper, no. 34, October 2015, pages 26 and 27). In our analysis of the events of that morning, we conclude that U.S. bond ETFs were resilient and largely immune to the turmoil in the equity markets.

Read more…

TOPICS: Bond FundBondsEquity InvestingEuropeExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund Regulation

Retirement Planning: No Place for Fairy Tales

By Paul Schott Stevens

November 17, 2015

It is sadly appropriate that Labor Secretary Thomas Perez invokes fairy tales in his Nov. 16 commentary, “A path forward for state retirement plans.” Neither his version of the past nor his program for the future accord with reality.

Read more…

TOPICS: 401(k)Fund RegulationGovernment AffairsMutual FundRetirement Policy

Changes to Money Market Funds Are Showing Up in Data

By Sean Collins

November 10, 2015

In July 2014, the Securities and Exchange Commission (SEC) adopted new regulations for money market funds.

Read more…

TOPICS: Fund GovernanceFund RegulationMoney Market Funds

Correcting a Distorted Picture of Retirement Resources

By Peter Brady

October 21, 2015

Can 401(k) plans and individual retirement accounts (IRAs) provide the income that retirees need to supplement Social Security and enjoy a secure retirement? 

Read more…

TOPICS: EventsGovernment AffairsInvestor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavings

Small Savers at a Loss

By Brian Reid and Sarah Holden

September 25, 2015

As ICI has pointed out before, the proposed rule from the Department of Labor (DOL) to redefine what counts as a fiduciary relationship in the retirement market is fundamentally flawed. But it is no less flawed than the DOL’s justification for it—a Regulatory Impact Analysis that fails to demonstrate a market failure that supports the need for such a sweeping and costly rule.

Read more…

TOPICS: Government AffairsInvestor ResearchPolicy ResearchRetirement PolicyRetirement ResearchSavings

The Wall Street Journal’s Dangerous Disservice to Investors

By Mike McNamee

September 22, 2015

For 75 years, mutual funds have successfully met their regulatory obligation to fulfill redemption requests within seven days, meeting investor demands and delivering on their investment objectives through good markets and bad.

Yet the Wall Street Journal seems determined to ignore this established history and the circumstances surrounding it. It has created a liquidity “measure” of its own devising—a test that no regulator has endorsed and no informed market participant would credit. The newspaper uses its self-invented process to imply that bond mutual funds are “pushing the limits” of Securities and Exchange Commission (SEC) guidelines governing fund liquidity.

Read more…

TOPICS: Bond FundBondsEquity InvestingExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeFund GovernanceFund RegulationMutual Fund

New York Times Paints False Picture of Funds’ Emerging Market Investments

By Mike McNamee

August 24, 2015

With the global market turmoil over the past week, it’s no surprise that journalists are looking for hot stories of panic, investor flight, and impending crisis. Either they believe that investors are inherently flighty and panic-prone, or they believe that “this time is different” and investors who have not panicked before will panic now.

Read more…

TOPICS: Bond FundBondsEquity InvestingEuropeFinancial MarketsFinancial StabilityFixed IncomeICI GlobalInternationalMutual Fund

Ignore the IMF’s Uninformed Call for a Third Round of Reforms to U.S. Money Market Funds

By Jane Heinrichs and Chris Plantier

July 23, 2015

A year ago today, the U.S. Securities and Exchange Commission (SEC) voted to adopt sweeping reforms to its rule governing money market funds.

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationMoney Market FundsMutual FundTreasury

The IMF on Asset Management: Handle Empirical Results with Care

By Chris Plantier

July 15, 2015

In this ICI Viewpoints series, we’ve examined the wide range of data errors, inconsistencies, results that don’t bear statistical scrutiny, and misinterpretations in the International Monetary Fund’s most recent Global Financial Stability Report (GFSR)—specifically, the chapter on “The Asset Management Industry and Financial Stability.” Those problems primarily involved poor understanding of funds and their investors. We didn’t need advanced statistical methods to uncover them.

Read more…

TOPICS: EuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury

ICI Welcomes IOSCO’S Call to Focus on Products and Activities in Asset Management

By Paul Schott Stevens

June 17, 2015

ICI President and CEO Paul Schott Stevens today issued the following statement in response to the communiqué released today by the Board of the International Organization of Securities Commissions (IOSCO)

Read more…

TOPICS: Financial StabilityFund RegulationICI GlobalInternationalMutual Fund

How SIFI Designation Could Undermine Fund Governance: Parsing the Fed’s Proposal for GE Capital

By Paul Schott Stevens

June 16, 2015

Fund boards and independent directors have a long history of serving shareholder interests, yet today they face an alarming prospect that could threaten their ability to continue doing so.

Read more…

TOPICS: Federal ReserveFinancial StabilityFund GovernanceFund RegulationMutual FundShareholderTreasury

Cybersecurity: Managing Risk in an Increasingly Connected World

By Todd Bernhardt

June 12, 2015

It’s increasingly obvious that we live in a world where cyber threats are evolving quickly and will remain persistent. But though such risks can never be eliminated, they can be managed, said panelists at ICI’s Operations and Technology Conference, held in conjunction with the Institute’s General Membership Meeting May 6–8 in Washington, DC.

Read more…

TOPICS: CybersecurityEventsFund GovernanceGMMOperations and Technology

Facing the Future: A Conversation with Former Chairmen

By Candice Gullett

June 11, 2015

On the second day of ICI’s annual General Membership Meeting (GMM), held May 6–8 in Washington, DC, three former ICI chairmen sat down with current ICI President and CEO Paul Schott Stevens to share the lessons they learned over the course of their careers, as well as during their years of service as volunteer leaders at ICI.

Read more…

TOPICS: EventsGMMMutual Fund

Navigating Regulatory Developments and Meeting Investors’ Needs in a Global Industry

By Jeanne C. Arnold

June 9, 2015

There is a great opportunity for capital markets to develop all over the world, presenting a huge opportunity for the mutual fund industry, according to David Wright, secretary general of the International Organization of Securities Commissions (IOSCO).

Read more…

TOPICS: EventsFinancial StabilityGMMInternational

The IMF on Asset Management: Sorting the Retail and Institutional Investor “Herds”

By Sean Collins

June 4, 2015

Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.

In this ICI Viewpoints series, we’re examining the wide range of data errors, inconsistencies, results that don’t bear statistical scrutiny, and misinterpretations in the International Monetary Fund’s April 2015 Global Financial Stability Report (GFSR)—specifically, the chapter on “The Asset Management Industry and Financial Stability.” These problems undercut the IMF’s conclusion that “Even simple investment funds such as mutual funds can pose financial stability risks.”

 

Read more…

TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research

How Millennials Are Shaping the Evolution of Investment Advice

By Christina Kilroy

June 2, 2015

The future of investment advice—as embodied in the youngest cohort of working Americans, known as the Millennial Generation—was the focus of a panel of financial services industry leaders at ICI’s 57th General Membership Meeting. The approximately 75 million 18- to 34-year-olds that make up the group have now overtaken Generation X (ages 35 to 50) as the largest generational group in the workforce, according to Pew Research Center.

Read more…

TOPICS: Equity InvestingEventsGMMInvestment EducationMutual Fund

The IMF on Asset Management: Which Herd to Follow?

By Sean Collins

June 1, 2015

Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.

In April 2015, the International Monetary Fund (IMF) published its most recent Global Financial Stability Report (GFSR), which included a chapter titled, “The Asset Management Industry and Financial Stability.”

We have heard suggestions from more than one observer that the IMF’s GFSR Chapter on asset management provides a wealth of charts, tables, and data to support regulators’ case that regulated funds or asset managers could pose systemic risks.

Read more…

TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research

Fresh Perspectives on a Changing World

By Miriam Bridges

May 29, 2015

Implications of globalization, the impact of the Millennial Generation on product development, the search for alpha in a world full of passive products—these were among the top priorities and concerns of the fund industry discussed by a panel of industry leaders at ICI’s 57th annual General Membership Meeting (GMM), held May 6–8 in Washington, DC.

Read more…

TOPICS: CybersecurityFund RegulationGMMICI GlobalMutual FundSavings

The IMF on Asset Management: The Perils of Inexperience

By Sean Collins

May 28, 2015

Part of a series of ICI Viewpoints about problems in the IMF’s analysis of the asset management industry.

In April, the International Monetary Fund (IMF) released its most recent Global Financial Stability Report (GFSR), including a chapter on “The Asset Management Industry and Financial Stability.”

Read more…

TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationGovernment AffairsICI GlobalInternationalMutual FundPolicy Research

Build Bridges, Not Walls: An Admiral’s Perspective on Global Security

By Rob Elson

May 27, 2015

If we are to strengthen global security, retired U.S. Navy Admiral James G. Stavridis says, we cannot continue to build walls—we must build bridges instead.

Read more…

TOPICS: EventsGMMInternational

SEC Chair White Affirms Agency Has Tools to Address Risks in Industry

By Rachel McTague

May 8, 2015

The U.S. Securities and Exchange Commission (SEC) has the tools it needs to address systemic risks to the extent they exist in the asset management industry, said SEC Chair Mary Jo White at the opening session on the final day of ICI’s annual General Membership Meeting (GMM). White also announced that David Grim—who had been serving as acting director of the SEC’s Division of Investment Management—has just been named director of the division. White said she is thrilled that Grim, a 20-year veteran of the SEC in the investment management area, is taking the reins at a time when the Commission is moving forward to implement proactive regulations for the industry.

Read more…

TOPICS: BondsCybersecurityEuropeEventsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFund RegulationGMMGovernment AffairsInterest RateInternationalMutual FundShareholderTreasury

Nooyi’s Purpose, Pepsi’s Performance

By Rob Elson

May 7, 2015

We all have a moral compass. But for PepsiCo’s Indra Nooyi, “the moral compass of our lives must also be the moral compass of our livelihoods.”

Stirring words from the company’s chair and chief executive—and just a few of the many she delivered in a lively Q&A with Vanguard Chairman and CEO Bill McNabb at ICI’s 57th General Membership Meeting, which began yesterday in Washington, DC.

Read more…

TOPICS: EventsGMMInternationalShareholder

Opinion: The Tax Threat to Your Mutual Fund

By Mike McNamee

May 7, 2015

Vanguard Chairman and CEO Bill McNabb sent “an open letter to all mutual fund investors” in the opinion pages of Thursday’s Wall Street Journal. His message: fund investors face a clear threat of higher costs, weaker returns, and a bailout tax to salvage other failing financial institutions—all if regulators get their way in imposing new rules on funds or their managers.

Read more…

TOPICS: 401(k)Federal ReserveFinancial MarketsFinancial StabilityFund RegulationMutual FundRetirement PolicySavingsShareholderTradingTreasury

GMM Policy Forum: “It Always Comes Down to Trust”

By Todd Bernhardt

May 6, 2015

Over the 75-year history of the modern mutual fund industry, funds have helped to democratize investing, providing a tremendous array of investing options at a reasonable cost for millions of people. And given rapid advances in technology and the efficiencies that they can bring, the future looks even brighter, said Walter W. Bettinger II at the opening session of ICI’s 57th General Membership Meeting (GMM).

Read more…

TOPICS: 401(k)EventsFund RegulationGMMMutual FundShareholder

2015 Investment Company Fact Book: Letter from the Chief Economist

By Brian Reid

May 4, 2015

A version of this letter by ICI Chief Economist Brian Reid was released today in our 55th edition of the Investment Company Fact Book.

This year marks the 75th anniversary of the Investment Company Act and the Investment Advisers Act—the key statutes under which mutual funds, exchange-traded funds (ETFs), closed-end funds, and unit investment trusts are regulated and governed. In 1940—the same year that Congress enacted these laws—the fund industry formed the National Committee of Investment Companies, the trade group that became the Investment Company Institute (ICI).

Read more…

TOPICS: Financial MarketsFinancial StabilityFund RegulationInvestor ResearchPolicy ResearchRetirement ResearchTrading

ICI Global Welcomes the Announcement of More Stock Connects in Asia Pacific

By Qiumei Yang

April 22, 2015

In response to the announcement about a launch date for the Taiwan Stock Exchange and Singapore Exchange trading link, and recent reports of a possible Shenzhen–Hong Kong Stock Connect, ICI Global’s Qiumei Yang offers the following comment:

Read more…

TOPICS: ICI GlobalInternationalTrading

The IMF Quietly Changes Its Data, but Not Its Views

By Chris Plantier

April 21, 2015

On Friday, April 10, we pointed out that the International Monetary Fund (IMF) apparently had vastly overstated the size and growth of bond fund holdings of emerging market bonds in its latest Global Financial Stability Report (GFSR).

Read more…

TOPICS: Bond FundBondsEuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury

Federal Reserve Reverse Repo Facility Helps Stabilize Short-Term Money Markets

By Chris Plantier

April 17, 2015

Following a pattern observed at the end of recent quarters, money market fund holdings of European issuers dropped at the end of March, although the decline was not as large as the previous quarter, ending December 2014. As we have noted before, for regulatory reasons European banks have been paring their balance sheets at the end of each quarter, resulting in a temporary decline in their desire to borrow from money market funds.

Read more…

TOPICS: BondsEuropeFederal ReserveFinancial MarketsFixed IncomeFund RegulationInvestment EducationMoney Market FundsTreasury

More Unfounded Speculation on Bond ETFs and Financial Stability

By Shelly Antoniewicz and Mike McNamee

April 13, 2015

A recent column in the Financial Times warns of “another accident in waiting” in the growth of fixed-income exchange-traded funds (ETFs)—described as “financial alchemy” that converts illiquid bonds into “baskets” that “trade moment to moment on the stock exchanges.” This “illusory” ETF liquidity will disappear, the author warns, when investors “want to move en masse, and quickly, when the going gets less good.”

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFinancial MarketsFinancial StabilityFixed IncomeInterest RateTrading

The IMF Is Entitled to Its Opinion, but Not to Its Own Facts

By Sean Collins and Chris Plantier

April 10, 2015

On Wednesday, the International Monetary Fund released its latest Global Financial Stability Report (GFSR), including a chapter on the asset management industry and financial stability.

Read more…

TOPICS: EuropeFinancial StabilityFund RegulationICI GlobalInternationalMutual FundTreasury

On Fiduciary Rule, New York Times Relies on Fatally Flawed Research

By Paul Schott Stevens

April 8, 2015

Today I submitted the following letter to the editor of the New York Times:

Read more…

TOPICS: 401(k)Fund RegulationInvestment EducationRetirement PolicySavingsShareholder

Designation’s Vast Reach into Investor Portfolios

By Paul Schott Stevens

March 24, 2015

On Wednesday, March 25, I’ll testify before the Senate Committee on Banking, Housing, and Urban Affairs about the Financial Stability Oversight Council’s process for designating nonbank firms as “systemically important financial institutions,” or SIFIs.

Read more…

TOPICS: Federal ReserveFinancial MarketsFinancial StabilityFund RegulationGovernment AffairsMutual FundShareholderTreasury

Once Again, Information Moves Markets

By Sean Collins

March 18, 2015

Treasury yields fell sharply today and the stock market jumped. Wouldn’t it be nice if mutual funds could take credit? Unfortunately, they can’t. Any orders that mutual fund investors place to buy or sell shares anytime today before 4:00 p.m. won’t hit the market until 4:00 p.m., just like any other day. And, if you are reading this blog post at the time of its posting, 4:00 p.m. is still 10 minutes away.

Read more…

TOPICS: Bond FundFederal ReserveFinancial MarketsFinancial StabilityInterest RateMutual FundTrading

Does Liquidity in ETFs Depend Solely on Authorized Participants?

By Shelly Antoniewicz and Jane Heinrichs

March 16, 2015

ICI recently conducted a survey of its members that sponsor exchange-traded funds (ETFs) to collect information on authorized participants (APs)—typically market makers or large institutional investors with an ETF trading desk that have entered into a legal contract with an ETF to create and redeem shares of the fund.

Read more…

TOPICS: Exchange-Traded FundsFinancial MarketsFinancial StabilityTrading

Why Long-Term Fund Flows Aren’t a Systemic Risk: Multi-Sector Review Shows the Same Result

By Sean Collins

March 4, 2015

In a recent blog post discussing why we believe flows from long-term mutual funds do not pose risk to the financial system, we posted a chart showing that outflows from bond funds are modest even during periods of stress in the financial markets.

Read more…

TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund

Getting the Numbers Right on Investment Advice for Retirement Savers

By Brian Reid

February 26, 2015

As the Wall Street Journal noted this morning, ICI has deep concerns about the data used in a White House memorandum to support the Department of Labor’s push for tighter standards for financial advisers who help investors in employer plans—such as 401(k)s—and individual retirement accounts (IRAs).

Read more…

TOPICS: Government AffairsMutual FundRetirement PolicyRetirement Research

Simple Answers to the Federal Reserve’s Quandaries

By Mike McNamee

February 24, 2015

The Federal Reserve System can’t get past its perplexities on the role of mutual funds in financial stability. Time and again, the Fed’s governors, regional presidents, and staff return to the same hypothetical risks and speculative scenarios in which mutual funds somehow pose a threat to the financial system.

Read more…

TOPICS: Bond FundBondsExchange-Traded FundsFederal ReserveFinancial MarketsFinancial StabilityFixed IncomeMutual Fund

Why Long-Term Fund Flows Aren’t a Systemic Risk: Understanding the Data on Institutional and Retail Investors

By Sean Collins

February 20, 2015

In two previous ICI Viewpoints posts, I discussed the muted response of investors in long-term funds―which invest primarily in stocks, bonds, or both―to financial stresses, and examined some of the characteristics of funds and their investors that help explain that muted response.

Read more…

TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund

Why Long-Term Fund Flows Aren’t a Systemic Risk: Plus Ça Change, Plus C’est La Même Chose

By Sean Collins

February 19, 2015

As discussed in a previous ICI Viewpoints post, regulators and others have voiced concerns that long-term funds―funds that invest primarily in stocks, bonds, or both―might experience large outflows during a financial crisis, adding pressure on financial markets.

Read more…

TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund

Why Long-Term Fund Flows Aren’t a Systemic Risk: Past Is Prologue

By Sean Collins

February 18, 2015

A recent Brookings Institution conference on Asset Management, Financial Stability, and Economic Growth aired the “active policy debate on how to regulate asset managers to maximize economic growth without endangering financial stability.”

Read more…

TOPICS: Bond FundBondsFinancial MarketsFinancial StabilityFixed IncomeInvestor ResearchMutual Fund

European Banks Borrow Less from MMFs; the Federal Reserve Borrows More

By Chris Plantier

January 20, 2015

As we discussed in April and July of last year, due to regulatory pressures European banks generally have become less willing to borrow from U.S. money market funds (MMFs), especially at the end of the quarter. This quarter-end effect was particularly large at the end of December 2014.

Read more…

TOPICS: EuropeFederal ReserveMoney Market FundsTreasury

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