Junk funds gain $2.01 billion on week, gain follows two outflows

By Paul Deckelman

New York, Sept. 29 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – moved back into positive territory this week, posting their first net inflow after two consecutive weekly net outflows.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that $2.011 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the reporting week ended Wednesday.

That was a stark contrast to the $273.555 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 Sept. 21, which followed the $2.453 billion cash bleed during the week ended Sept. 14.

Those two outflows, totaling nearly $2.727 billion, followed the most recent net inflow the funds had seen before this week – the $610 million cash addition during the week ended Sept. 7.

On a longer-term basis, this week’s inflow was the 22nd seen so far this year, against 17 outflows.

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.

Recent weeks had seen several extremely large fund flows, besides the major cash drain two weeks ago.

Year-to-date inflow grows

With 39 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow rose this week to $9.267 billion from last week’s $7.255 billion, the Lipper data indicated.

This week’s level remains below the $9.982 billion figure seen during the Sept. 7 week, the peak cumulative net inflow for the year so far.

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 large outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile recorded a net inflow this week that was “closer to $3 billion,” according to a market source.

That was a solid rebound from the large outflows seen over the previous two weeks, the source said – more than $1 billion last week and “more than $1 billion bigger” than the $2.453 billion cash drain reported by AMG/Lipper during the Sept. 14 week.

Those outflows, in turn, contrasted with the net inflow that the service reported during the Sept. 7 week, which the source said was “a little under three times” the AMG/Lipper $610 million inflow amount that week, or approximately $1.8 billion, with the U.S.-domiciled portion of that “more than double” the AMG/Lipper figure, or around $1.2 billion.

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many mutual funds and ETFs domiciled outside of the United States, including strictly European junk funds and broader global funds, versus AMG/Lipper’s solely domestic orientation.

Because of that difference, which includes a much broader range of funds in the EPFR universe, while the two services’ respective weekly results usually point pretty much in the same direction, their actual numbers may sometimes vary widely – and occasionally they may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow.

So far this year, EPFR has tabulated 21 inflows, versus 18 outflows, while AMG/Lipper, as noted, has seen 22 inflows and 17 outflows.

IG corporate funds continue gains

Looking at fund flows for other asset classes, investment-grade corporate funds scored their 13th straight weekly gain this week, with a $2.334 billion net inflow, the Lipper data indicated.

That followed a $2.122 billion inflow during the week ended Sept. 21.

The high-grade funds’ most recent outflow was $638.599 million, during the week ended June 29 – which had been the first cash loss seen after 16 consecutive weeks of cash gains for the IG corporate funds.

This week’s inflow brought the funds’ year-to-date net inflow up to $37.929 billion, versus last week’s $35.594 billion.

This week’s total established a 13th consecutive new peak level for the year, according to Prospect News’ analysis of the data.

Leveraged loan funds improve

Loan-participation funds showed an inflow for the week of $480.756 million, the Lipper data said.

That follows last week’s inflow of $318.412 million.

The recent inflows are in contrast to the outflows from those funds which have been seen most weeks of this year.

The latest week’s inflow cut the overall cumulative net outflow for the year from the loan funds to $3.326 billion from last week’s $3.807 billion of year-to-date red ink.

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