Junk funds see $889 million inflow, second upturn after two outflows

By Paul Deckelman

New York, Aug 18 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – were on the upside for a second consecutive week, continuing to bounce back after two straight weeks of net outflows, one of them the largest such cash loss seen so far this year.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that $889 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 cash injection followed the $1.66 billion net inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Aug. 10.

Those two inflows, totaling $2.54 billion, represented a complete rebound from the $2.46 billion outflow recorded during the week ended Aug. 3.

According to a Prospect News analysis of the figures, that outflow was the biggest cash loss seen by the junk funds so far this year, topping the net $2.11 billion that left the funds during the week ended Jan. 13. It was also the largest outflow the funds had experienced since the week ended Dec. 16, 2015, when a $3.81 billion cash hemorrhage was recorded.

AMG/Lipper had also recently recorded a $175.43 million outflow during the week ended July 27.

Those two most recent outflows, totaling $2.64 billion, had followed three straight weekly inflows before that totaling $6.47 billion, the analysis indicated.

There was a $322 million inflow during the week ended July 20. It had followed a near-record huge inflow reported the week before, the $4.35 billion cash injection seen during the week ended July 13. That was the second-largest cash surge on record, only lagging the $4.97 billion inflow recorded during the week ended March 2 – the single biggest inflow seen by AMG/Lipper since it began tracking fund flows in 1992.

The service also reported a $1.80 billion inflow during the week ended July 6.

Those three inflows, in turn, had followed three straight outflows going back to mid-June totaling $4.20 billion, which themselves had stood in stark contrast to two straight weeks of inflows going back to the beginning of June and totaling $893.15 million.

The year had begun with outflows seen in five out of the first six weeks, which were then followed by a long stretch, between mid-February and late April, during which inflows had been seen in 10 weeks out of 11.

Since May, the flows have been inconsistent and choppy, mostly with one or two weeks of inflows alternating with a like number of outflows.

This week’s inflow was the19th seen so far this year, against 14 outflows.

Year-to-date inflow grows

With 33 reporting weeks now in the books for 2016, the year-to-date net inflow increased to an estimated $9.60 billion, Lipper said, up from last week’s $8.71 billion, although it remained down from the estimated $9.69 billion seen during the July 20th week, the year-to-date peak inflow total.

After the string of outflows early in the year, the fund flows reached their peak net outflow level for the year during the week ended Feb. 10, when they showed cumulative red ink of $5.17 billion.

For all of 2015, meanwhile, there had been 28 inflows and 24 outflows in that time, the analysis showed, producing a net outflow for the year of $7.05 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.

IG corporate funds gain

Looking at fund flows for other asset classes, investment-grade corporate funds scored their seventh straight weekly gain, with a $2.16 billion net inflow, the Lipper data indicated.

That followed inflows of $2.52 billion during the week ended Aug. 10, $2.47 billion during the week ended Aug. 3 and $1.48 billion during the week ended July 27.

During the weeks ended July 27 and Aug. 3, the high-grade funds saw sizable inflows while their speculative-grade cousins saw investor money fleeing those junk funds, indicating an apparent flight to safety on the part of many investors.

This week’s inflow brought the funds’ year-to-date net inflow up to $27.95 billion, Lipper said, versus last week’s $25.79 billion.

This week’s total established a seventh consecutive new peak level for the year, according to Prospect News’ analysis of the data.

© 2015 Prospect News.
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