Junk funds see $1.18 billion inflow, seventh gain in last eight weeks

By Paul Deckelman

New York, April 7 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – moved back to the upside this week after having seen a net outflow last week.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that $1.181 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

It was the seventh week in the last eight during which more cash came into those funds than flowed out.

This week’s inflow was in stark contrast to the $545 million 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 March 30.

That outflow last week had been the first loss after six consecutive weeks during which inflows had been seen, five of them of considerable size, topping at least the $1.5 billion mark, while several of those were more than $2 billion.

During that six-week winning streak – lasting from the week ended Feb. 23 through the week ended March 23 – inflows had totaled $13.404 billion, according to a Prospect News analysis of the figures.

One of those inflows had been the mammoth $4.967 billion cash injection during the week ended March 2 – which was not only the largest funds gain seen so far this year, easily surpassing the previous mark of $2.74 billion the week before that, ended Feb. 24, but was also the single largest inflow ever recorded since AMG/Lipper began tracking fund flows back in 1992. It thus surpassed the previous record-holder, the $4.25 billion inflow seen during the week ended Oct. 26, 2011.

The latest week’s inflow was the eighth gain in the 14 weeks since the start of the year, versus six outflows.

Year-to-date inflow swells

With 14 reporting weeks now in the books for 2016, the year-to-date net inflow figure rose to $8.873 billion, the Prospect News analysis indicated – a new peak level for the year so far – from $7.692 billion last week and from $8.237 billion during the March 23 week, the previous zenith.

The fund flows, which started the year off with a string of outflows, reached their peak net outflow level for the year on Feb. 10, when they showed cumulative red ink of $5.165 billion.

For all of 2015, meanwhile, there had been 28 inflows and 24 outflows, the 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 big inflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile also recorded a sizable inflow this week, with a market source seeing a cash gain “roughly the same” as the one reported by AMG/Lipper.

That was in sharp contrast to last week, when the source had reported “the inflow streak ended, with an outflow in the $800 million range.”

And the week before that, when investor cash was still coming into the funds, he saw “inflows of over $2.5 billion for the fourth week running.”

Overall, that inflow in the March 23 week had been the fifth in a row seen by EPFR, going back to the week ended Feb. 24. That stretch included a cash injection in the March 2 week which the source characterized as “record-setting inflows tied strongly to U.S. HY funds.”

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

The latest inflow brings the total for the year seen by EPFR up to six, against eight weekly outflows.

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 extend gains

Looking at fund flows for other asset classes, investment-grade corporate bond funds stayed on the positive side of the ledger this week, notching their fifth straight inflow.

Those investment-grade funds saw a net gain of $1.02 billion during the reporting week, well up from the $112 million seen last week.

During that five-week winning streak – with net inflows totaling $6.638 billion in that time, according to a Prospect News analysis of the data – the largest single cash injection was $2.176 billion during the week ended March 9.

The most recent outflow from the funds had been in the week ended March 2, when they declined by $761.406 million.

With 14 Thursday-to-Wednesday reporting weeks of the year complete, there have now been seven inflows, matching the seven outflows, with the $1.451 billion outflow reported during the week ended Feb. 3 the biggest downturn so far this year.

This week’s inflow tipped the IG corporates fund-flows total into the black for the first time this year, with a $482.065 million net inflow seen, versus the $519.935 million cumulative outflow recorded last week, according to the analysis.

© 2015 Prospect News.
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