Spooked clients junk investments in high-yield bonds

Spooked clients junk investments in high-yield bonds
Investors in junk bond funds withdrew $2.1B from the funds -- in a single day. As one portfolio manager sayd: 'There's clearly a panic going on in the market.'
AUG 05, 2011
By  John Goff
Intensifying concern over Europe's sovereign debt crisis and the potential spillover for the U.S. economy are creating “panic” in the junk-bond market, according to Pioneer Investment Management Inc.'s Andrew Feltus. Investors withdrew an unprecedented $2.1 billion from junk mutual funds globally on Aug. 9, research firm EPFR Global said. Relative yields on high-yield bonds, rated below Baa3 by Moody's Investors Service and lower than BBB- by Standard & Poor's, have soared to 730 basis points, the highest since 2009, while returns on the debt have declined 4.6 percent this month. “There's clearly a panic going on in the market,” Feltus, who oversees the $2.1 billion Pioneer High Yield Fund, said today in a Radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “Prices are at such a point that you can even survive a recession, but people aren't looking at the fundamentals. They're just looking at the technicals, and ‘get me out of here.'” Feltus's fund has declined 10.5 percent this month through yesterday, after climbing 17.6 percent in 2010, according to data compiled by Bloomberg. The extra yield investors demand to hold junk bonds instead of Treasuries has jumped 106 basis points, or 1.06 percentage points, since Aug. 5, when S&P stripped the U.S. government of its top credit grade. That implies defaults between eight and nine percent over the long term, while defaults currently are in the two to three percent range, Feltus said. “The volatility in the market's awful,” he said. “Right now you're trying to hang on.” --Bloomberg News--

Latest News

The 2025 InvestmentNews Awards Excellence Awardees revealed
The 2025 InvestmentNews Awards Excellence Awardees revealed

From outstanding individuals to innovative organizations, find out who made the final shortlist for top honors at the IN awards, now in its second year.

Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty
Top RIA Cresset warns of 'inevitable' recession amid tariff uncertainty

Cresset's Susie Cranston is expecting an economic recession, but says her $65 billion RIA sees "great opportunity" to keep investing in a down market.

Edward Jones joins the crowd to sell more alternative investments
Edward Jones joins the crowd to sell more alternative investments

“There’s a big pull to alternative investments right now because of volatility of the stock market,” Kevin Gannon, CEO of Robert A. Stanger & Co., said.

Record RIA M&A activity marks strong start to 2025
Record RIA M&A activity marks strong start to 2025

Sellers shift focus: It's not about succession anymore.

IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients
IB+ Data Hub offers strategic edge for U.S. wealth advisors and RIAs advising business clients

Platform being adopted by independent-minded advisors who see insurance as a core pillar of their business.

SPONSORED Compliance in real time: Technology's expanding role in RIA oversight

RIAs face rising regulatory pressure in 2025. Forward-looking firms are responding with embedded technology, not more paperwork.

SPONSORED Advisory firms confront crossroads amid historic wealth transfer

As inheritances are set to reshape client portfolios and next-gen heirs demand digital-first experiences, firms are retooling their wealth tech stacks and succession models in real time.