Junk funds jump $2 billion in latest week, third consecutive upturn

By Paul Deckelman

New York, Dec. 8 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – posted a third consecutive week of net inflows this week after having broken a string of six straight outflows before that.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that $2.034 billion more came into those weekly reporting-only domestic funds than left them via investor redemptions during the week ended Wednesday.

That big cash addition followed the $342 million inflow reported last Friday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Nov. 30, which in turn followed a $598 million inflow for the week ended Nov. 23.

The three weeks of inflows, totaling $2.974 billion, stood in stark contrast to the $2.284 billion outflow posted during the week ended Nov. 16 – the most recent of six consecutive weekly cash declines totaling $7.349 billion.

Those outflows also included the gaping $4.116 billion cash loss seen during the week ended Nov. 2 – easily the largest outflow so far this year and the third largest on record, according to a Prospect News analysis of the data.

According to the Prospect News analysis, this week’s inflow was the fourth gain in the last 10 weeks, dating back to the week ended Oct. 5, which saw a $1.908 billion inflow.

On a longer-term basis, this week’s inflow was the 26th so far this year, versus 23 outflows.

Year-to-date inflow rises

With 49 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow rose this week to $6.800 billion from $4.766 billion during the Nov. 30 week, the data showed, although those levels remained well down from the $11.175 billion recorded during the Oct. 5 week.

That latter figure established a new peak cumulative net inflow for the year so far, surpassing the former high-water mark of $9.982 billion set during the week ended Sept. 7.

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 second straight inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile also saw an inflow this week “close to” the AMG/Lipper inflow figure, according to a market source.

It was the second consecutive cash gain the service had reported, following a $600 million overall inflow last week, which included over $1 billion of net cash going to funds domiciled solely in the United States (EPFR’s methodology differs from AMG/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 AMG/Lipper’s solely domestic orientation).

Those two net inflows stood in contrast to four weeks of outflows before that, including a huge cash loss in the week ended Nov. 2, with the market source calling it “a bit higher [than the giant-sized $4.116 billion outflow reported that week by AMG/Lipper], but still in the ballpark.”

Because of the difference in the EPFR and AMG/Lipper methodologies, while the two services’ respective weekly results frequently 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 while the other sees an outflow.

Taking those differences into account, EPFR has now tabulated 27 inflows on the year versus 22 outflows, compared to AMG/Lipper’s 26 inflows and 23 outflows, as noted.

IG corporates back in the black

Looking at fund flows for other asset classes this week, investment-grade corporate funds turned solidly positive this week, in contrast to the loss they suffered last week, which followed three straight weeks before that in positive territory.

The Lipper data indicated that the funds saw net inflows of $2.583 billion in the week ended Wednesday, versus last week’s net outflows of $1.302 billion – which had followed inflows of $1.559 billion in the week ended Nov. 23, which came on top of cash gains of $469.99 million in the week ended Nov. 16 and $676 million in the Nov. 9 week.

Those three inflows had contrasted sharply with the $2.495 billion outflow seen during the week ended Nov. 2.

This week’s inflow raised the funds’ year-to-date net inflow to $44.282 billion from last week’s $41.699 billion.

That set a new peak cumulative inflow figure for the year so far, according to the Prospect News data analysis of the data, surpassing the previous zenith of $43.001 billion seen during the week ended Nov. 23.

© 2015 Prospect News.
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