Better than expected US growth in the third quarter, an encouraging start to Q3 corporate earnings reports and perceived progress towards a resolution of the sovereign debt crisis in Europe were all to thank for the surge into high yield, according to EPFR.
In its latest global fund flows and allocations data, for the week to 26 October, EPFR Global said the "shift from defence to offence" had been reflected in a number of other fund groups.
Frontier equity funds broke an 11-week outflow streak, while the diversified GEM equity funds recorded their biggest weekly inflows since early April.
Meanwhile, funds in traditionally defensive sectors saw outflows, with utilities sector funds witnessing redemptions for the first time in 11 weeks and investors pulling over $1bn out of US short term government and intermediate term bond funds.
Overall, EPFR Global-tracked equity funds saw net inflows of $2.8bn for the week, while bond funds pulled in $1.69bn.
Thomas Becket, manager of the PSigma Dynamic Multi-Asset Fund, made a positive call on high yield bonds over a month ago.
Back then he said investors could make equity style returns but with much lower volatility by buying high yield bonds at their under-valued level at the time.
Now, he said, there is a big resurgence underway, but believes there is still more to come.
"At the end of September high yield bonds were down 4% year-to-date and now they are up 3% year-to-date on a total return basis.
"The best opportunities are probably gone, but they might come back depending on what happens in Europe over the medium term."
He added that most sectors were at "pretty attractive prices" at the moment, but he tipped Frontier markets, emerging markets and Japan to outperform over a three-year term.
