Junk funds see $162 million inflow, third straight upturn after two straight outflows

By Paul Deckelman

New York, Aug. 25 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – were on the upside for a third consecutive week, continuing to bounce back after two straight weeks of net outflows, one of them the largest such cash loss seen so far this year.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $162 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 cash injection followed the $889 million net inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Aug. 17, and before that, the $1.66 billion inflow during the week ended Aug. 10.

Those three inflows, totaling $2.71 billion, represented a more than complete rebound from the $2.46 billion outflow recorded during the week ended Aug. 3.

According to a Prospect News analysis of the figures, that Aug. 3 week outflow was the biggest cash loss seen by the junk funds so far this year, topping the net $2.11 billion that left the funds during the week ended Jan. 13. It was also the largest outflow the funds had experienced since the week ended Dec. 16, 2015, when a $3.81 billion cash hemorrhage was recorded.

AMG/Lipper had also recently recorded a $175.43 million outflow during the week ended July 27.

Those two most recent outflows, totaling $2.64 billion, had followed three straight weekly inflows before that, going back to early July, totaling $6.47 billion, the analysis indicated.

Among them was the $4.35 billion cash injection seen during the week ended July 13. That was the second-largest cash surge on record, only lagging the $4.97 billion inflow recorded during the week ended March 2 – the single biggest inflow seen by AMG/Lipper since it began tracking fund flows in 1992.

Those three inflows, in turn, had followed three straight outflows going back to mid-June totaling some $4.20 billion, which themselves had stood in stark contrast to two straight weeks of inflows going back to the beginning of June and totaling some $893.15 million.

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

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

This week’s inflow was the 20th seen so far this year, against 14 outflows.

Year-to-date inflow grows

With 34 reporting weeks now in the books for 2016, the year-to-date net inflow increased to an estimated $9.76 billion, the analysis indicated, up from last week’s $9.60 billion. It also established a new year-to-date peak inflow total, surpassing the previous estimated high-water mark of $9.69 billion seen during the July 20 week.

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 $5.17 billion.

For all of 2015, meanwhile, there had been 28 inflows and 24 outflows in that time, the analysis showed, producing a net outflow for the year of $7.05 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 large inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile recorded a net inflow “north of $600 million” in the latest week, a market source said.

It was the third consecutive cash gain reported by the funds that EPFR tracks, on top of the nearly $2 billion inflow seen last week and an inflow “similar” in size to the $1.66 billion that AMG/Lipper had reported during the Aug. 10 week.

Those three weeks of cash gains stood in marked contrast to the Aug. 3 week, when EPFR reported a $3 billion global outflow, with $1.9 billion of that attributable to funds domiciled in the United States, according to the market source (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).

That cash loss in the Aug. 3 week had been the first such cash loss that EPFR had seen since the week ended June 29, when it had posted a $3.36 billion cash bleed.

After that earlier outflow, the service had reported four consecutive inflows, including a $710 million cash addition during the week ended July 27, a market source said.

Before that had come an inflow of nearly $2 billion for the week ended July 20, an inflow “in that same vicinity” as the huge AMG/Lipper number in the week ended July 13, the source said, and an inflow during the July 6 week of over $2 billion.

And in line with the AMG/Lipper numbers, EPFR had seen three large inflows before that, dating back to mid-June.

Because EPFR’s methodology does differ from AMG/Lipper’s, including a much broader range of funds in its universe, that 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 they 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 five times so far this year – most recently during the July 27 week, when EPFR saw a fourth straight weekly net inflow while AMG/Lipper saw an outflow snapping a three-week string of inflows.

So far this year, EPFR has tabulated 18 inflows versus 16 outflows, while AMG/Lipper has reported 20 inflows and 14 outflows.

IG corporate funds gain

Looking at fund flows for other asset classes, investment-grade corporate funds scored their eighth straight weekly gain, with a $1.92 billion net inflow, the Lipper data indicated.

That followed inflows of $2.16 billion during the week ended Aug. 17, of $2.52 billion during the week ended Aug. 10, of $2.47 billion during the week ended Aug. 3, and before that, of $1.48 billion during the week ended July 27.

During the weeks ended July 27 and Aug. 3, the high-grade funds saw sizable inflows – while their speculative-grade cousins saw investor money fleeing those junk funds, indicating an apparent flight-to-safety on the part of many investors.

The investment-grade funds had also recently taken in a net of $894 million during the July 20 week, $2.93 billion during the July 13 week and $907 million during the July 6 week.

That was when the funds started rebounding after a net outflow of $638.60 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 $29.89 billion, versus last week’s $27.95 billion.

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

© 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.