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Bond Funds Brace for Outflows With Push Into Corporate-Debt ETFs

Senator Richard Shelby, a Republican from Alabama and chairman of the Senate Banking Committee, left, and Senator Sherrod Brown, a Democrat from Ohio, right, listen as Janet Yellen, chair of the U.S. Federal Reserve, center, speaks during a Senate Banking Committee hearing in Washington, D.C., on Feb. 24, 2015. Yellen said inflation and wage growth remain too low even as the job market improves, and she signaled that a change in the Fed's guidance on interest rates won't lock it into a timetable for tightening.

Senator Richard Shelby, a Republican from Alabama and chairman of the Senate Banking Committee, left, and Senator Sherrod Brown, a Democrat from Ohio, right, listen as Janet Yellen, chair of the U.S. Federal Reserve, center, speaks during a Senate Banking Committee hearing in Washington, D.C., on Feb. 24, 2015. Yellen said inflation and wage growth remain too low even as the job market improves, and she signaled that a change in the Fed's guidance on interest rates won't lock it into a timetable for tightening.

Photographer: Andrew Harrer/Bloomberg

Investors have a fickle relationship with credit mutual funds lately, pouring cash in one year and yanking it out the next.

As a result, the world’s biggest mutual-fund firms are preparing for when sentiment sours for a prolonged period. They’re increasing the amount of cash in their portfolio and boosting their holdings of corporate-bond exchange-traded fund shares -- which trade like stocks instead of the antiquated, telephone-based system of buying and selling debt.