Fixed-Income ETF Investors Warm up to Riskier Assets

High-yield, speculative-grade bond exchange traded funds are attracting billions of dollars as market volatility dissipates and investors look to capitalize on cheaper valuations in riskier assets after the recent sell-off.

Investors funneled $2 billion into funds in high-yield and high-yield municipal debt peer groups over February, Todd Rosenbluth, S&P Global Market Intelligence Director of ETF & Mutual Fund Research, wrote in a note.

According to EPFR, high-yield bond funds saw the largest four weeks of inflows since 2012, the Financial Times reports.

“This is a one in every four or five years buying opportunity,” Mark Kiesel, chief investment office for global credit at PIMCO, told the Financial Times, pointing out that in the sell-off, credit spreads had become too wide relative to the health of the underlying companies. “Credit is offering equity returns with half the volatility.”

The S&P U.S. Issued High Yield Corporate Bond Index returned 0.5% in February after hitting a nadir mid-month and rallying 3.7% in the last two weeks.