Junk funds gain $726 million in week, fourth rise after two-week skid

By Paul Deckelman

New York, Feb. 23 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – were in positive territory for a fourth consecutive reporting week after two straight net outflows before that, according to data released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $726 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 net inflow followed the $158 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. 15, and before that, inflows of $442 million during the week ended Feb. 8 and $413 million during the week ended Feb. 1.

Those four inflows, totaling $1.739 billion, represent a clear 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, on top of an $887 million outflow seen during the week ended Jan. 18.

The new year had begun with a pair of inflows totaling $1.298 billion – the $564 million inflow seen during the week ended Jan. 11, as well as the first inflow of the year and the largest so far, a $734 million cash addition in the week ended Jan. 4.

Those two inflows had been part of an overall three-week run of consecutive cash gains totaling $1.89 billion that also included the $592 million inflow recorded in the week ended Dec. 28, 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 – the sixth so far this year, against two outflows – was the seventh such gain in the last 10 weeks dating back to the week ended Dec. 21, versus three outflows during that stretch.

It raised the estimated year-to-date net inflow total to $1.618 billion from $892 million last week.

That also establishes a new estimated peak year-to-date inflow total, eclipsing the former mark of $1.298 billion seen during the week ended Jan. 11.

The cumulative flow numbers have been recovering over the past four weeks from the estimated $121 million year-to-date outflow recorded during the week ended Jan. 25, the only week so far in which the year-to-date total has dipped into the red.

The fund flows’ relatively strong start this year, apart from their temporary detour into negative territory, 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, before a six-week surge that generated more than $13 billion of inflows during that time.

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 fifth straight gain

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow

“a little north of $1 billion,” according to a market source.

It was the fifth consecutive large inflow recorded by EPFR. Last week, the source said the cash gain had been “close to $1 billion,” and “more like $2 billion” during the week before that, ended Feb. 8.

That came on the heels of an inflow “in excess of $2 billion,” during the week ended Feb. 1 and “north of $1.5 billion,” during the week ended Jan. 25 – even though AMG/Lipper had reported an outflow in that earlier 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 usually point pretty much in the same direction, as they did this week, their actual numbers may sometimes vary widely – for instance, EPFR’s inflow of nearly $1 billion last week and in the $2 billion area the previous two weeks while AMG/Lipper reported considerably smaller inflows in each of those weeks, or during the week ended Jan. 11, when EPFR had reported an inflow that the market source called “roughly double” the size of the corresponding AMG/Lipper figure.

Occasionally, the numbers may even diverge completely, with one service reporting an inflow in a given week while the other sees an outflow, as was most recently the case during the Jan. 25 week.

Taking those differences into account, EPFR has now seen seven inflows so far this year and one outflow, versus AMG/Lipper having seen six 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 10th consecutive gain overall and their eighth 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 $2.566 billion this week.

That followed the $3.054 billion inflow seen last week, ended Feb. 15.

Before that came a massive $4.932 billion inflow during the week ended Feb. 8 – 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 the corporate funds have seen in more than two years, since October of 2014.

That brought the year-to-date surge so far up to an estimated $22.907 billion this week – the peak 2017 cumulative inflow level so far, versus $20.341 billion last week, the previous high point.

That cash cascade also includes the $2.657 billion inflow during the week ended Feb. 1, 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.

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