Junk funds see $322 million inflow, third gain in a row

By Paul Deckelman

New York, July 21 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – saw their third consecutive net inflow this week, a run that follows three straight weekly outflows, market sources said Thursday.

However, the latest inflow was a mere fraction of the near-record inflow reported last week.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $322 million more came into those weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

That was well down from the $4.351 billion inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended July 13.

Last week’s cash addition was the second largest on record, only lagging the $4.967 billion cash surge recorded during the week ended March 2 – the single biggest inflow seen by AMG since it began tracking fund flows in 1992.

Last week’s inflow thus displaced the previous second-biggest cash addition on the record – the $4.25 billion recorded during the week ended Oct. 26, 2011.

The market sources said that nearly $2.6 billion came into junk ETFs last week while traditional actively managed high-yield mutual funds drew nearly $1.8 billion of cash.

The three inflows, totaling $6.471 billion, follow three straight outflows totaling $4.196 billion.

Those three outflows stood in stark contrast to the two weeks of inflows totaling $893.153 million that had preceded them.

The latest week’s inflow was the 17th cash gain since the start of the year, versus 12 outflows, according to a Prospect News analysis of the figures.

The year began with outflows in five out of the first six weeks – which were followed by a long stretch, between mid-February and late April, during which inflows were seen in 10 weeks out of 11.

Since May, the flows have been inconsistent and choppy, mostly with one or two inflows alternating with a like number of outflows.

Year-to-date inflow grows

With 29 reporting weeks now in the books for 2016, the year-to-date net inflow grew to an estimated $9.964 billion from last week’s $9.372 billion total.

That establishes a new year-to-date peak inflow total, surpassing the former zenith of $9.664 billion, recorded during the April 27 week, which had been the fourth consecutive new peak level for the year so far, according to the Prospect News analysis.

After the string of outflows early in the year, the fund flows reached their peak net outflow level for the year during the week ended Feb. 10, when they showed cumulative red ink of $5.165 billion.

For all of 2015, meanwhile, there were 28 inflows and 24 outflows, the 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 major inflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile recorded a roughly $2 billion net inflow during the week, according to a market source.

As was the case with the AMG/Lipper numbers, it was the third consecutive weekly inflow.

According to the market source, EPFR had reported an inflow “in that same vicinity” as the huge Lipper number last week, which had followed an inflow during the July 6 week of over $2 billion.

And as had been the case with the recent AMG/Lipper inflows, they followed three straight weekly cash losses – a $3.36 billion cash hemorrhage in the June 29 week, an outflow of over $2.5 billion in the June 22 week, and a more than $3 billion cash drain in the June 15 week, the market source said.

The week before that, ended June 8, had seen a $2.5 billion inflow.

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.

The difference in the methodologies means that while the two services’ respective weekly results usually point pretty much in the same direction, their actual numbers may sometimes vary widely – and occasionally may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow, or vice versa.

The latter scenario has happened four times so far this year.

IG corporate funds gain

Looking at fund flows for other asset classes, investment-grade corporate funds scored their third straight weekly gain with an $894 million net inflow, the Lipper data indicated.

The funds had also taken in a net of $2.934 billion last week and $907 million during the July 6 week, bouncing back after a net outflow of $638.599 million during the June 29 week – which had been the first cash loss seen after 16 consecutive weeks of cash gains for the IG corporate funds.

This week’s inflow brought the funds’ year-to-date net inflow up to an $19.324 billion from $18.43 billion last week.

This week’s total established a third consecutive new peak level for the year, according to Prospect News’ analysis of the data.

© 2015 Prospect News.
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