Junk funds jump by $2.375 billion, biggest inflow of year

By Paul Deckelman

New York, April 6 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned strongly positive in the latest reporting week, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $2.375 billion more came into the weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday, April 5.

This was not only the biggest inflow seen so far this year – easily topping the $736 million inflow recorded during the week ended March 22 – but it was in fact the largest cash gain the funds have seen since the $4.351 billon inflow for the week ended July 13, 2016.

This week’s big inflow followed the $249 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 March 29.

That outflow, in turn, had followed the aforementioned $736 million inflow during the March 22 week.

Before that had come three consecutive weeks of outflows totaling $8.042 billion, including the $5.683 billion cash loss recorded in the week ended March 15.

That huge outflow was not only the largest cash hemorrhage so far this year, easily surpassing the $2.119 billion loss recorded just the week before that, but it was also the second-largest money drain the junk funds have ever seen, exceeded only by the massive $7.068 billion outflow during the week ended Aug. 6, 2014.

Year-to-date outflow narrows

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

It was also the sixth gain in the last 10 weeks, dating back to the week ended Feb. 1, versus four outflows during that stretch.

It cut the estimated year-to-date net outflow number to $3.562 billion from $5.947 billion last week.

The cumulative net outflow was down from the $6.424 billion seen during the March 15 week, the largest cumulative net outflow level seen for the year so far.

Before the recent headlong plunge into negative territory 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 sizable inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow during the week of over $3 billion, according to market source.

It was the first inflow the service had seen after four consecutive weekly net outflows, including a cash loss last week “in the vicinity” of the outflow that AMG/Lipper had reported, the market source said.

During the March 22 week, EPFR had seen an outflow of $1.385 billion, even as AMG/Lipper was recording an inflow after three straight weeks of outflows.

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 both this week and last week, their actual numbers may sometimes vary widely. Occasionally, the two companies’ numbers may even diverge completely, as happened two weeks ago, with one service reporting an inflow while the other sees an outflow.

Taking those differences into account, EPFR has now seen nine inflows so far this year and five outflows, versus AMG/Lipper’s eight cash gains and six cash losses.

IG corporates’ rise rolls on

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 16th consecutive gain overall and their 14th straight inflow this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $2.706 billion during the reporting week ended Wednesday.

That follows the $3.966 billion inflow recorded last week, which – while sizable – was still clearly well down from the $5.239 billion cash addition recorded during the March 22 week – the biggest inflow of the year so far and one of the biggest such numbers ever, surpassing the $4.932 billion inflow during the week ended Feb. 8.

That March 22 cash addition was not only the biggest inflow this year but was the largest gain the corporate funds have seen in more than two years.

The latest inflow brought the year-to-date surge so far up to $41.797 billion this week – the peak 2017 cumulative inflow level so far, versus $39.091 billion last week, the previous high point.

© 2015 Prospect News.
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