Junk funds see $1.796 billion inflow in week, fourth straight gain

By Paul Deckelman

New York, March 10 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – stayed strongly positive this week, posting their fourth consecutive advance and third straight sizable gain.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that some $1.796 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

While sizable, that inflow paled in comparison with the $4.967 billion cash addition reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended March 2.

Last week’s inflow was not only the largest cash addition seen so far this year, surpassing the $2.74 billion inflow the week before that, ended Feb. 24, but it was the single largest inflow recorded since AMG/Lipper began tracking fund flows back in 1992.

The latest week’s inflow was the fifth cash gain seen in the 10 weeks since the start of the new year, according to a Prospect News analysis of the figures, versus five outflows. Besides the inflows seen over the past four weeks, which also included a gain of $65.5 million during the week ended Feb. 17, the only other inflow, of $883.3 million, was recorded during the week ended Jan. 27, with outflows seen in all the other weeks.

Year-to-date inflow grows

With 10 reporting weeks now in the books for 2016, the year-to-date net inflow figure grew to $4.403 billion – its peak level for the year – from $2.607 billion last week, according to the analysis.

Last week’s total was the first time since the start of the year that the cumulative fund flows number had been in the black.

During the week ended Feb. 24, the funds had shown a cumulative net outflow of $2.36 billion. The peak cumulative deficit for the year was $5.165 billion during the week ended Feb. 10.

For all of 2015, meanwhile, there had been 28 inflows and 24 outflows, the Prospect News analysis showed, producing a net outflow for the year of $7.046 billion.

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 huge inflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile also recorded a sizable inflow this week, with a market source seeing close to $3 billion more of fresh cash having come into the funds during the week than had left them.

It was the second straight huge inflow that the service had seen, with the source characterizing last week’s cash injection as “record setting inflows tied strongly to U.S. HY funds.”

Overall, this week’s inflow was the third in a row seen by EPFR, with another inflow in the week ended Feb. 24 that was “modestly higher” than that week’s AMG/Lipper total.

Before that came seven straight weekly outflows since the start of the year.

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, including strictly European junk funds and broader global funds, versus AMG/Lipper’s solely domestic orientation.

While the two services’ respective weekly results usually point pretty much in the same direction, that hasn’t always been the case; the two services’ findings have diverged twice so far this year, and several times last year.

Corporate funds see huge gain

Looking at fund flows for other asset classes, investment-grade corporate bond funds posted a net inflow of $2.176 billion for the week, versus last week’s $761.406 million outflow.

With 10 Thursday-to-Wednesday reporting weeks of the new year complete, there have been only three inflows in that time – the others were the $141.8 million inflow for the Feb. 24 week and a $551.385 million cash gain in the Feb. 10 week. This week’s inflow was the biggest so far this year.

There have been seven outflows since the start of the year, with the $1.451 billion outflow reported during the week ended Feb. 3 the biggest downturn so far this year.

The year-to-date outflow total for 2016 fell to $5.961 billion from last week’s $6.137 billion, according to a Prospect News analysis of the figures. Last week’s figure was the peak deficit for the year so far.

For 2015, when inflows were seen in 28 weeks, against 24 weeks of outflows, net inflows for the year totaled just $1.826 billion according to the analysis.

Loan funds snap skid

Meanwhile, leveraged loan participation funds, which struggled all of the last two years and which have remained under pressure this year, finally snapped a long losing streak, according to the latest Lipper data.

Some $55 million more came into those funds than left them during the week ended Wednesday – the first gain in 33 weeks.

The long losing streak dated back to the week ended last July 29.

The modest gain – the only one seen so far this year, versus nine straight outflows – stands in contrast to last week’s $356.852 million cash loss.

The latest week’s inflow shaves the year-to-date net outflow total to $4.969 billion from last week’s $5.024 billion, the peak cumulative loss for the year so far according to a Prospect News analysis of the data.

In 2015, the funds racked up a net outflow total of $16.406 billion.

© 2015 Prospect News.
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