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Published on 10/26/2017 in the Prospect News High Yield Daily.

Junk funds gain $123 million, rebounding from last week’s outflow

By Paul Deckelman

New York, Oct. 25 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – moved back into positive territory this week with a modest net inflow, according to numbers released on Thursday, rebounding from a net outflow seen last week.

That outflow, in turn, had been the first setback after four consecutive weekly gains.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $123 million more came into those weekly reporting-only domestic funds than left them during the week ended Wednesday, Oct. 25.

That inflow was in contrast to the $450 million outflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Oct. 18.

That outflow had snapped a four-week winning streak in which a net total of $2.91 billion had come into the funds – a $967 million inflow for the week ended Oct. 11 and inflows of $646 million during the week ended Oct. 4, $433 million for the week ended Sept. 27 and $866 million in the week ended Sept. 20.

Those four inflows had followed a $96 million net outflow during the week ended Sept. 13.

Year-to-date outflow narrows

According to a Prospect News analysis of the data, this week’s inflow was the 22nd so far this year, versus 21 outflows during that time.

It was the sixth cash gain in the last 10 weeks, dating back to the week ended Aug. 23, versus four cash losses during that time.

This week’s inflow cut the estimated year-to-date net outflow number to $6.99 billion from last week’s $7.11 billion.

Those cumulative outflow totals remain below the $9.82 billion of red ink seen during the Aug. 30 week, the widest year-to-date net outflow figure.

That Aug. 30 week’s year-to-date figure also represented the biggest cumulative net outflow number the junk funds had seen in recent memory, surpassing the $9.75 billion year-to-date deficit recorded the week ended Aug. 6, 2014, the previous wide mark.

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 gains continuing

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw its sixth consecutive net cash gain this week, with $170 million more coming into the junk funds than exiting them, according to a market source.

That followed what the source described as a “tiny” net inflow last week.

Before that, the source said, EPFR had recorded an inflow just north of $800 million during the Oct. 11 week, as well as inflows of $1.22 billion in the Oct. 4 week, of $1.38 billion in the Sept. 27 week and $243 million in the Sept. 20 week.

EPFR last saw an outflow during the Sept. 13 week, when it said the funds it tracks lost $711 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 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, such as during the Oct. 4 week, when EPFR’s reported inflow ($1.22 billion) was about twice the $646 million inflow that Lipper had seen.

And occasionally, the two companies’ numbers may even diverge completely, as happened last week, with EPFR recording a small inflow and Lipper seeing an outflow, as noted.

Taking those differences into account, EPFR has now seen 25 inflows so far this year and 18 outflows, versus Lipper, which, as noted, has seen 22 cash gains and 21 cash losses.

IG corporates continue rebound

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their sixth consecutive weekly gain following a rare two straight weekly losses.

The Lipper calculations indicated that the funds saw a net inflow of $3.26 billion during the reporting week ended Wednesday, on the heels of a $3.39 billion upturn seen last week.

The inflows seen over the past six weeks had followed net outflows of $25 million during week ended Sept. 13 and $43 million during the week ended Sept. 6, which had been the first loss of the year after 35 straight net inflows this year before that and 37 inflows overall dating back to the week ended Dec. 21, 2016, according to a Prospect News analysis of the data.

This week’s inflow raised the year-to-date net inflow figure to $104.12 billion from last week’s $100.86 billion, establishing a fifth consecutive new 2017 cumulative peak level.


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