High yield bond funds showing big inflows

Two high yield bond funds have announced significant inflows, as investors seek yield from fixed income allocations.

The Baring High Yield Bond Fund has almost doubled its assets under management since December 2011 to $1 billion and has shifted from European to emerging markets. And the ING Asian Debt Local Bond Fund has taken over $100 million in assets from institutional clients since February 2012.

Baring High Yield Bond Fund investment manager, Ece Ugurtas, commented: “The record low yields on government paper in some developed markets, namely the US and Germany, has made it difficult for fixed income investors to find sources of income. High yield remains one area which continues to display attractive incomegenerating qualities for yield-seeking investors.” Ugurtas said that the fund has reduced its UK exposure to 4.6% and its European holdings to 9.1%. At present, 59.6% of the fund is in US high yield, with 19.2% in emerging market high yield debt. Cash is used to manage volatility, and the allocation is up from 4.7% in December 2011 to 7.6% in July 2012. Urgurtas said the fund has reduced its European exposure as a result of the ongoing European sovereign debt crisis.

Commenting on inflows into its Asian debt local bond fund, IMG IM head of global emerging markets, Rob Drijkoningen, said: “Government issues dominate Asian local bonds and accordingly fiscal dynamics are extremely important to the asset class. The relatively low offshore involvement in the regional local bond universe is not commensurate with the strengths detailed above. Asian bond markets have grown significantly since the 1997 Asian financial crisis, and with more corporations looking to issue an increasing amount of debt in their local currencies, we reasonably expect continued growth of the asset class supported by investor demand.”