Junk funds soar $2.22 billion on week, first gain after four declines

By Paul Deckelman

New York, July 20 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – rebounded solidly this week after four straight weeks on the downside, according to numbers released Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $2.22 billion more came into those weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday, July 19.

The big net inflow stood in stark contrast to the $1.14 billion net outflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended July 12.

That outflow had been the funds’ third consecutive large cash loss and their fourth straight downturn overall. It had followed an almost identically sized $1.16 billion outflow seen during the week ended July 5, a $1.74 billion outflow during the week ended June 28 and, before that, a $128 million outflow during the week ended June 21.

Those four most recent outflows, totaling $4.16 billion, followed three consecutive weeks of inflows totaling $1.31 billion.

Year-to-date outflow narrows

According to a Prospect News analysis of the data, this week’s inflow was the 14th so far this year, versus 15 outflows during that time.

It was the fifth cash gain in the last 10 weeks, dating back to the week ended May 17, matched against five outflows during that time.

This week’s inflow narrowed the estimated year-to-date net outflow number to $6.65 billion from last week’s $8.87 billion, which had been a third consecutive new 2017 net outflow wide point.

Before their headlong plunge into negative territory seen during the last few months, the flows had shown a relatively strong start to the year.

They had posted six inflows during the first 10 reporting weeks of the year, reaching a peak cumulative net inflow total of $1.62 billion during the week ended Feb. 22.

They were still in positive territory for the year-to-date during the week ended March 1, with a $1.38 billion net inflow, before falling into the red 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 upturn

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow to high-yield funds in the latest week.

Like the positive AMG/Lipper number, it was the first upturn for the funds EPFR tracks after four straight weeks on the slide.

According to a market source, EPFR saw an inflow to the United States-domiciled funds it tracks that was “roughly” in line with that tabulated by Lipper. However, he added that the “headline number” – i.e. the overall EPFR global high-yield fund flows number – showed an inflow on the week that was smaller than that for the domestic funds due to “European high-yield fund redemptions.”

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 source indicated that outflows from the funds had been seen over the previous four weeks, including an outflow last week that he estimated was “about double” the size of the outflow that Lipper had reported.

During the week ended July 5, the source said, EPFR had seen an outflow “in that same ballpark” as the Lipper figure – but during the week ended June 28, EPFR’s reported outflow was “only one-eighth the size” of the Lipper outflow number.

In contrast, during the June 21 week, the source said, EPFR’s reported outflow was an eye-popping “roughly nine times bigger” than the corresponding Lipper outflow number.

Because of the difference in their methodologies, while 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, and sometimes are actually quite close, other times the numbers can vary widely, as was the case last week, or during the June 21 and June 28 weeks.

Occasionally the two companies’ numbers may even diverge completely, as most recently happened during the week ended May 3, when Lipper saw a $386 million outflow and EPFR calculated a $300 million inflow.

Taking those differences into account, EPFR has now seen 16 inflows so far this year and 13 outflows, versus Lipper, which, as noted, has seen 14 cash gains and 15 losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 31st consecutive gain overall and their 29th straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $3.82 billion during the reporting week ended Wednesday.

The week before, ended July 12, had seen a $2.3 billion cash injection.

The latest inflow brought the year-to-date surge so far up to an estimated $74.59 billion this week – the peak 2017 cumulative inflow level so far, versus the $70.77 billion seen last week, the previous high point for the year.

© 2015 Prospect News.
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