Junk funds gain $641 million in week, first inflow after three losses

By Paul Deckelman

New York, Sept. 7 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – improved this week after three consecutive weeks on the downside, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $641 million more came into those weekly-reporting-only domestic funds than left them during the week ended Wednesday, Sept. 6.

That net inflow follows three straight weekly outflows – the cash loss of $277 million reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Aug. 30 and outflows of $1.01 billion during the week ended Aug. 23 and $2.19 billion during the week ended Aug. 16.

Those three outflows, totaling $3.47 billion, had followed – and completely dwarfed – two inflows totaling $319 million in the two weeks before that, a $124 million cash gain during the week ended Aug. 9 and a $195 million inflow for the week ended Aug. 2.

Year-to-date outflow narrows

According to a Prospect News analysis of the data, this week’s inflow was the 17th so far this year, versus 19 outflows during that time.

It was the fourth cash gain in the last 10 weeks, dating back to the week ended July 5, versus six cash losses in that period.

This week’s inflow narrowed the year-to-date net outflow to $9.18 billion from last week’s $9.82 billion, which had established a second consecutive new year-to-date widest net outflow figure, eclipsing the previous 2017 net outflow wide point of $9.55 billion set the week before last.

Last week’s new year-to-date figure also represented the biggest cumulative net outflow number the junk funds had seen going back at least to 2011, surpassing the $9.75 billion year-to-date deficit recorded the week ended Aug. 6, 2014, the previous mark.

Before their headlong plunge into negative territory seen during the last few months, 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 second inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow for this reporting week that a market source said was “a little bit higher” than the AMG/Lipper inflow figure.

It was the second successive weekly inflow reported by EPFR, which had also seen a cash addition last week that the market source estimated was “a little bit over $400 million.”

That followed two straight net outflows – a cash loss during the Aug. 23 week that he said was “about double” the $1.01 billion AMG/Lipper outflow number that week and an outflow in the Aug. 16 week that the source said was “in that same ballpark” as the $2.19 billion cash loss seen that week by Lipper.

EPFR’s methodology differs from 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 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; sometimes their numbers track fairly closely, as happened to be the case this week, while other times, they may differ widely.

Occasionally the two companies’ numbers may even diverge completely, as happened last week.

Taking those differences into account, EPFR has now seen 19 inflows so far this year and 17 outflows, versus Lipper, which, as noted, has seen 17 cash gains and 19 cash losses.

IG corporates finally stumble

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their first loss of the year this week, after 35 straight inflows so far this year and 37 inflows overall, according to a Prospect News analysis of the data.

The Lipper calculations indicated that the funds saw a net outflow of $43 million during the reporting week ended Wednesday, in contrast to the $743 million inflow during the week ended Aug. 30.

It was the first weekly outflow from those funds since the $81 million cash loss seen during the week ended Dec. 14, 2016.

This week’s outflow – however modest – reduced the year-to-date net inflow figure to an estimated $87.27 billion, down from the $87.31billion seen last week, the 2017 cumulative peak level seen so far.

© 2015 Prospect News.
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