Due to the forced bond selling by ETFs to meet the surge in redemptions, a number of institutional fund managers have been able to jump in after the excessive sell-off, turning sudden moments of illiquidity into opportunities for generating outperformance. [Institutional Investors Jump On Cheaper Junk Bonds, ETFs]
“You can make a lot of money from buying things when ETFs blindly sell them, and you have seen increasing numbers of portfolio managers doing this,” Ashish Shah, head of global credit investment at AllianceBernstein, said in the article. “That’s the reason why the high-yield market has come back so quickly.” [Junk Bond ETFs Say Return to me; Investors Listen]
Consequently, market observers argue that we will likely experience increased bouts of volatility ahead as more investors try to capitalize on selling pressure in an illiquid market.
For more information on speculative-grade debt, visit our junk bonds category.
Max Chen contributed to this article.
Full disclosure: Tom Lydon’s clients own shares of JNK, HYG and LQD.
