Junk funds up $736 million in week, rebounding from $5.68 billion loss

By Paul Deckelman

New York, March 23 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – saw their biggest net inflow of the year so far in the most recent reporting week, according to data released on Thursday.

The funds bounced at least part of the way back from the gigantic $5 billion-plus net outflow which had been reported the previous week – the biggest downturn seen so far this year and the second-largest cash loss on record.

This week’s inflow was the funds’ first after three weeks of losses.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $736 million more came into the weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday, March 22.

This week’s inflow was the largest gain so far this year, nosing out the previous high of $734 million posted during the first reporting week of the year, ended Jan. 6.

The latest inflow followed the $5.683 billion outflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended March 15.

That huge outflow was not only the largest cash hemorrhage so far this year, surpassing the $2.119 billion loss recorded during the week ended March 8, but was also the second-largest money drain the junk funds have ever seen, exceeded only by the massive $7.068 billion outflow recorded during the week ended Aug. 6, 2014.

Last week’s outflow had been the third straight downturn the junk funds had seen, a run of red ink that followed four weeks of inflows.

Year-to-date outflow narrows

According to a Prospect News analysis of the data, this week’s inflow was the seventh so far this year, against five outflows.

It was also the fifth gain in the last 10 weeks, dating back to the Jan. 18 week, versus five outflows during that stretch.

It narrowed the estimated year-to-date net outflow number to $5.688 billion from last week’s $6.424 billion.

Last week’s plunge had established a new cumulative net outflow level for the year, eclipsing the $741 million former mark set during the March 8 week.

Before the recent headlong plunge into negative territory the flows had shown a relatively strong start to the 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 sees continued outflows

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile saw a net outflow during the week of $1.385 billion, a market source said.

It was the third consecutive big weekly outflow number for the service. The market source said that last week, EPFR had seen an outflow which had been “very close” to the outflow number reported by AMG/Lipper.

The week before, ended March 8, its outflow had reached $2.678 billion, which had been its first downturn after six consecutive weeks of net inflows, including a cash gain seen during the week ended March 1 which he said had been “over five times” the size of the outflow recorded that week by AMG/Lipper.

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, their actual numbers may sometimes vary widely. Occasionally, the two companies’ numbers may even 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 eight inflows so far this year and four outflows, versus AMG/Lipper having seen seven cash gains and five cash losses.

IG corporates’ rise rolls on

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 14th consecutive gain overall and their 12th straight inflow this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $5.239 billion this week.

It was the biggest inflow of the year so far and one of the biggest such numbers ever, surpassing the $4.932 billion inflow during the week ended Feb. 8.

The week’s cash addition was not only the biggest inflow to those funds seen so far this year, but was the largest cash injection the corporate funds have seen in more than two years.

The latest inflow brought the year-to-date surge so far up to an estimated $35.125 billion this week – the peak 2017 cumulative inflow level so far, versus $29.886 billion seen last week, the previous high point.

© 2015 Prospect News.
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