Junk funds see $4.351 billion inflow, second biggest gain ever

By Paul Deckelman

New York, July 14 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – saw their second consecutive net inflow this week, following three consecutive weekly outflows, market sources said Thursday.

The latest week’s cash addition was also the second-largest on record.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $4.351 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

That was the biggest inflow seen since the $4.967 billion cash surge recorded during the week ended March 2 – the single biggest inflow seen by AMG since it began tracking fund flows in 1992.

This week’s inflow thus displaced the previous second biggest on the record – the $4.25 billion recorded during the week ended Oct. 26, 2011.

Nearly $2.6 billion came into the junk ETFs, while more traditional, actively managed high-yield mutual funds drew nearly $1.8 billion of new cash.

This week’s giant-sized inflow followed – and easily dwarfed – the $1.798 billion inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended July 6.

Those two inflows, totaling $6.149 billion, follow three straight outflows totaling $4.196 billion – the $1.628 billion outflow during the week ended June 29, which itself had followed a $766 million outflow in the week ended June 22. Earlier, there had been a $1.802 billion outflow during the week ended June 15.

Those three outflows stood in stark contrast to the two straight weeks of inflows – totaling $893.153 million – that had preceded them.

These included the $748.153 million inflow during the week ended June 8 and the $145 million inflow during the week ended June 1.

The latest week’s inflow was the 16th cash gain since the start of the year, versus 12 outflows, according to a Prospect News analysis of the figures.

The year began with outflows in five of the first six weeks – then followed with a long stretch between mid-February and late April during which inflows were seen in 10 weeks out of 11.

Since May, the flows have been inconsistent and choppy, with one or two inflows alternating with a like number of outflows.

Year-to-date inflow grows

With 28 reporting weeks now in the books for 2016, the year-to-date net inflow grew to an estimated $9.372 billion from last week’s $5.201 billion total.

The year-to-date inflow total remains slightly below the $9.664 billion zenith recorded during the April 27 week, which had been the fourth consecutive new peak level for the year so far, according to the Prospect News analysis.

After the string of outflows early in the year, the fund flows reached their peak net outflow level for the year during the week ended Feb. 10, when they showed cumulative red ink of $5.165 billion.

For all of 2015, meanwhile, there were 28 inflows and 24 outflows, the analysis showed, producing a net outflow for the year of $7.046 billion.

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 major inflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile recorded an inflow “in that same vicinity” as the Lipper number, size-wise, according to a market source.

That followed an inflow last week of over $2 billion, in contrast to three straight weekly cash losses – a $3.36 billion cash hemorrhage in the June 29 week, a cash drain of over $2.5 billion in the June 22 week and a more than $3 billion outflow in the June 15 week, a market source said.

The week before that, ended June 8, had seen a $2.5 billion inflow, the market source said.

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, including strictly European junk funds and broader global funds, versus AMG/Lipper’s solely domestic orientation.

The difference in the methodologies means that while the two services’ respective weekly results usually point pretty much in the same direction, their actual numbers may sometimes vary widely – and occasionally may diverge completely, with one service reporting an inflow while the other sees an outflow, or vice versa.

The latter scenario has happened four times so far this year.

IG corporate funds gain

Looking at fund flows for other asset classes, investment-grade corporate funds scored their second straight weekly gain, with a $2.934 billion net inflow, the Lipper data indicated.

The funds had also taken in a net of $907 million last week, bouncing back after a net outflow of $638.599 million during the June 29 week – the first cash loss seen after 16 consecutive weeks of cash gains for the IG corporate funds.

This week’s inflow brought the funds’ year-to-date net inflow back up to an estimated $18.43 billion from $15.496 billion last week.

This week’s total established a second consecutive new peak level for the year, according to Prospect News’ analysis of the data.

© 2015 Prospect News.
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