Junk funds see record $4.97 billion inflow, third straight weekly gain

By Paul Deckelman

New York, March 3 – Cash flows for high-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – stayed strongly positive this week, posting their biggest net inflow on record.

It was the third straight cash gain, following last week’s smaller but still very sizable inflow and before that a more modest inflow which had snapped a two-week losing streak.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that some $4.967 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

It was not only the biggest inflow seen so far this year, surpassing the $2.74 billion cash addition reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Feb. 24, but it was the largest inflow recorded since AMG/Lipper began tracking fund flows back in 1992.

It thus surpassed the previous record-holder – the $4.25 billion inflow seen during the week ended Oct. 26, 2011.

Before the flow numbers were released, a debt capital markets banker, citing the huge daily inflows seen on Wednesday alone – $1.05 billion going into the actively managed funds, plus another $828 million into high-yield ETFs – predicted that the numbers would likely be huge, easily topping $2 billion.

A trader in the afternoon correctly speculated that “it could be a record.”

The latest week’s inflow was only the fourth gain seen in the nine weeks since the start of the new year, versus five outflows, according to a Prospect News analysis of the figures.

Year-to-date outflow narrows

With nine reporting weeks in the books for 2016, the year-to-date net fund flows figure swung into the black this week for the first time this year, at $2.607 billion, versus the $2.36 billion cumulative net outflow figure seen last week and the $5.165 billion outflow during the week ended Feb. 10, the peak cumulative deficit for 2016 so far.

It was also the first time the cumulative fund-flows figure had been in the black since the week ended Dec. 2, 2015, when there had been a $1.382 billion net inflow for the year – the last seen before the figures slid into the red.

For all of 2015, meanwhile, there had been 28 inflows and 24 outflows in that time, the Prospect News analysis showed, producing a net outflow for the year of $7.046 billion.

Cumulative fund-flow estimates may be revised upward or downward or they may be rounded off and could include unannounced revisions and adjustments to figures from prior weeks.

EPFR sees huge inflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile also saw what a market source called “record-setting inflows tied strongly to U.S. HY funds.”

It was the second consecutive gain seen by EPFR and only the second for the year so far, following seven straight weeks of outflows before that.

Last week, the source said, the headline number “was modestly higher” than the AMG/Lipper total, and was in fact the biggest inflow the service had recorded since the first week in November.

He said that funds domiciled in the United States “took the bulk of the fresh money.”

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, including strictly European junk funds and broader global funds, versus AMG/Lipper’s solely domestic orientation.

While the two services’ respective weekly results usually point pretty much in the same direction, that hasn’t always been the case; the two services’ findings have diverged twice so far this year, and several times last year.

Corporate funds back on the slide

Looking at fund flows for other asset classes, investment-grade corporate bond funds posted a net outflow of $761.406 million, versus last week’s $141.8 million inflow and before that, a $1.122 million outflow.

With nine Thursday-to-Wednesday reporting weeks of the new year complete, there have been only two inflows – the other was a $551.385 million cash gain in the Feb. 10 week – versus seven outflows in that time, including the $1.451 billion outflow reported during the week ended Feb. 3 – the biggest downturn so far this year.

The year-to-date outflow total for 2016 rose to $6.137 billion, a new peak deficit for the year, versus last week’s $5.376 billion and $5.518 billion during the week ended Feb. 17, the previous peak level for the year so far.

For 2015, when inflows were seen in 28 weeks, against 24 weeks of outflows, net inflows for the year totaled just $1.826 billion according to a Prospect News analysis of the figures.

Loan funds’ fall continues

Meanwhile, leveraged loan participation funds, which struggled all of the last two years, remained under pressure so far this year, according to the latest Lipper data.

Some $356.852 million more left those funds than came into them during the week ended Wednesday.

It was the loan funds’ eighth consecutive outflow so far in 2016, versus no inflows in that time, including last week’s $618 million cash downturn

The latest week’s outflow brings the year-to-date net outflow total to $5.024 billion, the peak cumulative loss for the year so far, versus the previous peak level of $4.667 billion last week, according to a Prospect News analysis of the data.

On a longer-tem basis, the latest outflow was the loan funds’ 31st consecutive downturn, according to the analysis.

The long losing streak dates back to the week ended July 29; the most recent inflow those funds have seen was the $208.1 million upturn in the week ended July 22.

In 2015, the funds racked up a net outflow total of $16.406 billion.

© 2015 Prospect News.
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