Junk funds gain $291 million this week, rebounding after two losses

By Paul Deckelman

New York, April 27 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned modestly positive in the latest reporting week after having spent two straight 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 $291 million more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday, April 26.

That net inflow follows two consecutive net outflows totaling $710 million – the $362 million cash loss reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended April 19 and before that a $348 million outflow recorded during the week ended April 12.

Those two outflows were in stark contrast to the $2.38 billion net inflow seen during the week ended April 5. That cash gain was not only the biggest inflow seen so far this year but was also, in fact, the largest cash injection the funds have seen since the $4.351 billon inflow for the week ended July 13, 2016.

The big April 5 inflow had followed a $249 million outflow during the week ended March 29.

Year-to-date outflow narrows

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

It was also the fourth cash gain in the last 10 weeks, dating back to the week ended Feb. 22, versus six outflows during that stretch.

It cut the estimated year-to-date net outflow number to $3.98 billion from $4.27 billion last week.

That cumulative net outflow figure remains narrower than the yawning $6.42 billion seen during the March 15 week, the most cumulative red ink seen for the year so far.

Before their headlong plunge into negative territory during the past nearly two months, the flows had shown a relatively strong start to the year.

They had reached a peak cumulative inflow total of $1.62 billion during the week ended Feb. 22, and they were still in positive territory for the year to date as recently as the week ended March 1, with a $1.38 billion net inflow, before heading south the following week and staying there after that.

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 large inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow of over $1 billion during the week, according to a market source.

That followed two straight weeks in which the source said EPFR had seen outflows “similar” in size to those which were concurrently reported by AMG/Lipper.

Those two outflows had followed an inflow of over $3 billion during the April 5 week, according to the market source – the first inflow that EPFR had seen after four consecutive weekly net outflows, including a cash loss during the March 29 week “in the vicinity” of the outflow that AMG/Lipper had reported, the source said.

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 has been the case in recent weeks, their actual numbers may sometimes vary widely, as was the case this week, with AMG/Lipper reporting a smallish inflow and EPFR calculating a large cash gain.

And 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 10 inflows so far this year and seven outflows, versus AMG/Lipper having seen nine cash gains and eight cash losses.

IG corporates see sizable gain

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 19th consecutive gain overall and their 17th straight inflow this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $4.699 billion during the reporting week ended Wednesday.

That follows the $1.45 billion recorded last week and the $96 million notched the week before that, ended April 12 – the smallest weekly gain this year.

The latest inflow brought the year-to-date surge so far up to an estimated $48.04 billion this week – the peak 2017 cumulative inflow level so far, versus $43.34 billion seen last week, the previous high point.

© 2015 Prospect News.
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