Junk funds gain $413 million in latest week, breaking two-week skid

By Paul Deckelman

New York, Feb. 2 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – got back in the black in the latest reporting week after two outflows, according to data released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $413 million more came into those weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

That net inflow was a solid rebound from the $532 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 Jan. 25, which had come on top of an $887 million outflow seen during the week ended Jan. 18.

Last week’s outflow had been the second one seen so far in the new year, moving away from the strength seen in the two weekly net inflows which had opened 2017.

Those twin setbacks, totaling $1.419 billion, had followed the $564 million inflow seen during the week ended Jan. 11, as well as the first inflow of the year, a $734 million cash addition in the week ended Jan. 4.

Those two inflows, totaling $1.298 billion, had been part of an overall three-week run of consecutive cash gains totaling $1.89 billion that also included the $592 million inflow recorded in the week ended Dec. 28, the last full reporting week of 2016.

Cumulative flows back in the black

According to a Prospect News analysis of the data, this week’s inflow was the seventh gain in the last 10 weeks dating back to the week ended Nov. 30, versus three outflows during that stretch.

It brought the year-to-date net fund flows total back into the black, producing a cumulative estimated net inflow total for the year so far of $292 million, versus the estimated year-to-date net outflow figure of $121 million that had been seen last week – the cumulative number’s first dip into the red this year. That was down from the estimated $411 million net inflow figure notched during the Jan. 18 week and the $1.298 billion net inflow seen the week before that, ended Jan. 11 – the peak cumulative estimated net inflow for the year so far.

The fund flows’ relatively strong start this year before their temporary detour into the red has been in sharp contrast to 2016, which had opened up with three consecutive outflows totaling $4.959 billion. Outflows were seen in five out of the first six weeks of last 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 records sizable gain

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow “in excess of $2 billion,” according to a market source.

That came on top of an inflow last week “north of $1.5 billion,” the source said – even though AMG/Lipper had reported an outflow in that corresponding week, as noted.

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 frequently point pretty much in the same direction, as they did this week, their actual numbers may sometimes vary widely – during the week ended Jan. 11, for instance, EPFR reported an inflow that the market source called “roughly double” the size of the corresponding AMG/Lipper figure.

And occasionally, they may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow, as was the case last week.

Taking those differences into account, EPFR has now seen four inflows so far this year and one outflow, versus AMG/Lipper having seen three cash gains and two cash losses.

IG corporates continue surge

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

The Lipper data indicated that the funds saw net inflows of $2.657 billion this week.

That brought the year-to-date surge so far up to an estimated $12.355 billion – the peak 2017 cumulative inflow level so far, versus $9.698 billion last week.

That cash cascade also includes last week’s $1.59 billion inflow, the $1.893 billion inflow in the week ended Jan. 18, the $4.029 billion inflow in the week ended Jan. 11 – which was the biggest gain those funds have seen in nearly two years, since February 2015 – and the $2.186 billion inflow during the week ended Jan. 4.

© 2015 Prospect News.
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