Junk funds see $1.679 billion inflow in week, fifth straight gain

By Paul Deckelman

New York, March 17 – 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 fifth consecutive advance and fourth straight sizable gain.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that some $1.679 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

The inflow follows the $1.796 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 March 9.

The latest week’s inflow was the sixth cash gain in the 11 weeks since the start of the year, according to a Prospect News analysis of the figures.

One of those inflows was the mammoth $4.967 billion cash addition during the week ended March 2, which was not only the largest funds gain seen so far this year, surpassing the $2.74 billion inflow the week before that, ended Feb. 24, but it was the single 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.

Year-to-date inflow grows

With 11 reporting weeks now in the books for 2016, the year-to-date net inflow figure grew to $6.082 billion, its third consecutive new peak level for the year. That was up from the previous peak level of $4.403 billion last week, and from $2.607 billion in the March 2 week, which had been the first time since the start of the year that the cumulative fund flows number had been in the black, after eight straight weeks before that on the downside, including the week of Feb. 10, when the funds had shown their peak cumulative red ink for the year of $5.165 billion.

For all of 2015, meanwhile, there were 28 inflows and 24 outflows, 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 recorded a sizable inflow this week, with a market source seeing close to $3 billion more of fresh cash having come into the funds during the week than had left them.

This week was the second consecutive week that EPFR had seen an inflow in the $3 billion vicinity.

This week’s cash gain – which the source said was about 40% attributable to funds domiciled in the United States – was the third straight huge inflow that the service had seen, with the source characterizing the cash injection in the March 2 week as “record setting inflows tied strongly to U.S. HY funds.”

Overall, this week’s inflow was the fourth in a row seen by EPFR, with another inflow in the week ended Feb. 24.

Before that came seven straight weekly outflows since the start of the year.

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 rebound continues

Looking at fund flows for other asset classes, investment-grade corporate bond funds posted a net inflow of $1.986 billion during the reporting week.

It was the funds’ second consecutive inflow, following last week’s $2.176 billion cash gain. In the March 2 week, the funds had seen a $761.406 million outflow.

With 11 Thursday-to-Wednesday reporting weeks of the new year complete, there have been just four inflows in that time. Last week’s inflow was the biggest of the year so far.

There have been seven outflows since the start of the year, with 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 fell to $1.976 billion from last week’s $3.962 billion, according Lipper.

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

Loan funds extend upturn

Meanwhile, leveraged loan participation funds, which struggled all of the last two years and which have remained under pressure this year, showed atypical strength for a second consecutive week this week – after 32 consecutive weeks of losses before that, according to the latest Lipper data.

Some $176.1 million more came into those funds than left them during the week ended Wednesday, on top of the $55 million net gain the funds saw last week.

The elongated losing streak dated back to the week ended last July 29; the most recent previous inflow those funds had seen, before the past two weekly gains, was the $208.1 million upturn in the week ended July 22.

The two modest weekly gains – the only ones seen so far this year, versus nine straight outflows – stand in contrast to the $356.852 million cash loss in the March 2 week.

The latest week’s inflow shaves the year-to-date net outflow total to $4.793 billion, Lipper said, versus last week’s $4.969 billion of cumulative red ink, and versus $5.024 billion in the March 2 week – the peak cumulative loss for the year so far according to a Prospect News analysis of the data.

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

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.