Junk funds gain $442 million in week, second rise after two-week skid

By Paul Deckelman

New York, Feb. 9 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – were in positive territory for a second consecutive reporting week after two outflows, according to data released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $442 million more came into the weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

That net inflow followed the $413 million cash gain reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Feb. 1.

Those two inflows, totaling $855 million, represented a rebound from the two weeks of outflows totaling $1.419 billion which came before that – a $532 million cash loss during the week ended Jan. 25 and an $887 million outflow during the week ended January 18.

The new year had begun with a pair inflows, totaling $1.298 billion, which had been part of an overall three-week run of consecutive cash gains totaling $1.89 billion that also included an inflow recorded in the last full reporting week of 2016.

Year-to-date inflows rise

According to a Prospect News analysis of the data, this week’s inflow was the seventh gain in the last 10 weeks dating back to the week ended Dec. 7, versus three outflows during that stretch.

It raised the year-to-date net inflow total to $734 million from $292 million last week, when the cumulative fund-flows total had gotten back into the black after having dipped into the red for the first time this year the week before.

However, the year-to-date total remained down from its peak level for 2017 so far – the $1.298 billion cumulative net inflow seen during the week ended Jan. 11.

The fund flows’ relatively strong start this year before their temporary detour into the red has been in sharp contrast to 2016, which had opened up with three consecutive outflows totaling $4.959 billion. Outflows were seen in five out of the first six weeks of last year.

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 records third straight gain

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow “more like $2 billion,” according to a market source.

It was the third consecutive large inflow recorded by EPFR. Last week, the source said the cash gain had been “in excess of $2 billion” and it was “north of $1.5 billion,” during the week ended Jan. 25 – even though AMG/Lipper had reported an outflow in that corresponding week, as noted.

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many mutual funds and ETFs domiciled outside the United States, such as strictly European junk funds and broader global funds, versus AMG/Lipper’s solely domestic orientation.

Because of that difference, while the two services’ respective weekly results frequently point pretty much in the same direction, as they did this week, their actual numbers may sometimes vary widely. Occasionally, the numbers may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow.

Taking those differences into account, EPFR has now seen five inflows so far this year and one outflow, versus AMG/Lipper having seen four cash gains and two cash losses.

IG corporates continue surge

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their eighth consecutive gain, and their sixth straight inflow seen so far this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $4.932 billion this week – not only the biggest inflow to those funds seen this year, surpassing the $4.029 billion net gain seen during the week ended Jan. 11, but the largest cash addition seen in more than two years, since October 2014.

That brought the year-to-date surge so far up to an estimated $17.287 billion this week – the peak 2017 cumulative inflow level so far, versus $12.355 billion last week.

That cash cascade also includes last week’s $2.657 billion inflow, a $1.59 billion inflow during the week ended Jan. 25, a $1.893 billion inflow in the week ended Jan. 18, the aforementioned $4.029 billion inflow in the week ended Jan. 11 and the first inflow reported this year, $2.186 billion during the week ended Jan. 4.

© 2015 Prospect News.
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