Junk funds gain $124 million this week, second straight inflow

By Paul Deckelman

New York, Aug. 10 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – rose moderately this week, according to numbers released on Thursday.

It was the second consecutive weekly gain and the third upturn in the last four weeks, breaking a recent negative pattern.

Sources familiar with the fund flow statistics generated by AMG Data Services Inc. said that $124 million more came into those weekly reporting only domestic funds than left them during the week ended Wednesday, Aug. 9.

That net inflow follows a $195 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 Aug. 2.

Those two inflows, totaling $319 million, contrasted with the $21 million net outflow seen the week of July 26. That smallish outflow followed a $2.22 billion inflow for the funds during the week ended July 19.

Year-to-date outflow narrows

According to a Prospect News analysis of the data, this week’s inflow was the 16th so far this year, versus 16 outflows during that time.

It was the fifth cash gain in the last 10 weeks, dating back to the week ended June 7, versus five cash losses during that time.

Besides this week’s and last week’s inflows, the previous week’s outflow and the inflow before that, the 10-week stretch also included four consecutive weeks of net outflows totaling $4.16 billion – a $1.14 billion outflow for the week ended July 12 and, before that, outflows of $1.16 billion during the week ended July 5, of $1.74 billion during the week ended June 28 and $128 million during the week ended June 21.

This week’s inflow narrowed the year-to-date net outflow number to $6.35 billion from last week’s $6.47 billion.

It remained less than the $8.87 billion cumulative outflow total posted during the July 12 week, the 2017 wide point, as well as the biggest cumulative net outflow number the junk funds had seen since the $9.75 billion year-to-date deficit recorded in the week ended Aug. 6, 2014.

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 modest inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow for the week “about double” the $124 million AMG/Lipper number, a market source said, attributing the difference to the impact of European high-yield funds.

It was the first inflow after two straight weeks of net outflows. The source said that last week the funds had lost “in excess of $700 million.”

The source had also seen an outflow the week before that, ended July 26, “in excess of $600 million.”

EPFR’s methodology differs from Lipper’s, as its fund universe includes many mutual funds and ETFs domiciled outside the United States, such as the strictly European junk funds which the market source said had been the driver behind this week’s larger overall inflow number, and broader global funds, versus Lipper’s solely domestic orientation.

The two services’ overall respective weekly results usually point pretty much in the same general direction in terms of a given week having an inflow or an outflow.

But occasionally, the two companies’ numbers may even diverge completely, as was the case last week, when the EPFR number was an outflow while AMG/Lipper was reporting an inflow.

Taking those differences into account, EPFR has now seen 17 inflows so far this year and 15 outflows, versus Lipper, which, as noted, has seen 16 cash gains and 16 cash losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 34th consecutive gain overall and their 32nd straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $2.464 billion during the reporting week ended Wednesday.

The week before, ended Aug. 2, had seen a $1.49 billion cash injection.

The latest inflow brought the year-to-date surge so far up to an estimated $80.85 billion this week – the peak 2017 cumulative inflow level so far, versus the $78.39 billion seen last week, the previous high point for the year.

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