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Investment-grade corporate bond funds suffered an outflow of $2.5 billion in the week ending Nov.
Despite this, the majority of its convertible and corporate bond funds were able to beat their benchmarks.
The difference is even more pronounced when money fund returns are compared with corporate bond funds; see Figure 1, below.
In comparison, well more than half of investment-grade short-, intermediate- and long-term corporate bond funds plus global income funds outperformed their benchmarks over three and five years.
There are also worries about the potential impact on mainstream corporate bond funds, partly because they also tend to be quite long duration but also because the corporate debt market can be illiquid and this could exacerbate price losses if rates had to go up.
The advertisements you have seen are for corporate bond funds. They are loans to large companies who promise to make fixed interest payments and to buy back the debt at the end of the term of the bond at a fixed price.
CORPORATE BOND FUNDS THESE are professionally managed funds which buys a large number of individual bonds so that you don't encounter the same risks as with retail corporate bonds.
CORPORATE BOND FUNDS CORPORATE BOND FUNDS THESE are professionally managed funds which buys a large number of individual bonds so that you don't encounter the same risks as with retail corporate bonds.
" Duration funds such as income funds do not take credit risk but carry high duration risk, while credit funds such as corporate bond funds are high on credit risk but maintain a tight duration of, say, two to three years," says Pandya.
"So corporate bond funds could provide a lot of protection as the stock market falls, and then from the lows we can switch into 'cheap' stock market-linked funds."
Since January, said The Financial Times, "a wall of money" has also gone into corporate bond funds, where failure rates are currently low and yields can approach 7%.

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