Investors are showing more signs of concern about some of the market's biggest sources of return, including tech stocks and emerging markets, but they have been moving big into another risk-on asset this quarter: high-yield bonds. The iShares iBoxx High Yield Corporate Bond ETF (HYG) is No. 2 among all exchange-traded funds in the current quarter in new money from investors, only outpaced by iShares S&P 500 ETF (IVV), bringing in near-$3 billion, according to XTF.com. That's more than the asset-gathering behemoth $100 billion Vanguard S&P 500 ETF (VOO). In August the iShares high-yield bond ETF ranked seventh among all ETFs for monthly flows, taking in close to $1.4 billion.

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Investors shied away from high-yield bond funds during the first half of the year — even with its big surge, iShares' HYG is still experiencing negative flows overall for the year. The reluctance to invest in junk bonds came despite the category's outperformance relative to other bond sectors, and the fact that it has been one of the only bond sectors generating positive returns this year. The Merrill Lynch High Yield 100 Index has returned 1.95 percent year-to-date, and the Merrill Lynch Triple-C-Rated Index, tracking the lowest rated part of the high-yield universe, has returned 4.95 percent. HYG has returned 2 percent so far this quarter and 1.6 percent this year, through Sept. 4. The ETF that tracks the broadest bond market benchmark, the iShares Core U.S. Aggregate Bond ETF (AGG), is down by about 1 percent this year. Emerging market bonds, another source of high yields in the fixed-income market, are down significantly this year as fears of a debt contagion in those markets have pummeled emerging debt from Turkey to Argentina. The iShares J.P. Morgan USD Emerging Markets Bond ETF is down 6.5 percent this year.

Capturing stock upside, but closely correlated to equities

Returns in traditional bond funds decrease as interest rates rise, and even as President Donald Trump recently challenged the Fed's decision to raise rates, many experts think there will be at least one to two more increases by the Federal Reserve this year due to strong economic data, including GDP growth and employment. Returns in high yield, commonly known as junk bonds, can capture some of the upside of stocks and see increased returns even as interest rates rise. But high-yield bond funds don't offer the portfolio diversification that is typically provided by more traditional bond fund categories, such as treasurys or investment-grade corporate, due to their close correlation to stocks. That means they remain vulnerable to a market downturn. Some more niche high-yield ETF plays are seeing even higher returns than the core iShares junk bond portfolio.

ETF Quarter-to-date return Year-to-date return SPDR Barclays Capital Short-Term High Yield 1.70% 2.90% iShares 0-5 Year High Yield Corporate 1.70% 2.80% iShares iBoxx High Yield ex-Oil & Gas 2.40% 2.70% Invesco BulletShares 2023 High Yield Corporate Debt 2% 2.60% PIMCO 0-5 Year High Yield Corporate Bond Index 1.50% 2.50%

The move into high yield signals investor confidence in the economy and in the high-yield asset class in general, said Todd Rosenbluth, director of mutual fund and ETF research at CFRA Research. Continuous good news on corporate profits and other economic indicators, combined with relatively flat returns from short-term U.S. treasurys and negative returns from the closely followed 10-year treasury bonds, are driving investors to riskier bonds. "When you see Treasury yields are low, people are more confident in taking a risk to get more yield," Rosenbluth said. "Investors in the past have been more fearful of credit vehicles, but we're in a risk-taking mode right now."

High-yield's recent run may be too good to be true