Junk funds up $592 million in latest reporting week, rebounding from previous outflow

By Paul Deckelman

New York, Dec. 30 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – got back in the black during the final week of 2016, posting a solid net inflow as they rebounded from a small net outflow seen last week.

That outflow had been the first such downturn after four straight weeks of net inflows, which in turn had followed a string of six straight net outflows before that.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $592 million more came into those weekly reporting-only domestic funds than left them in the form of investor redemptions during the reporting week ended on Wednesday.

That contrasted with the $19 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 Dec. 21.

That small outflow had snapped a four-week winning streak before that during which a net total of $6.72 billion had come into those funds.

These had included the $3.75 billion inflow recorded during the week ended Dec. 14 – one of the biggest that AMG/Lipper has ever seen, ranking fourth on the all-time list, according to a Prospect News analysis of the fund-flows data.

It was exceeded only by the $4.25 billion inflow seen during the week ended Oct. 26, 2011, the third-biggest inflow on record, and by two even bigger inflows seen earlier this year – the $4.35 billion cash gain seen during the week ended July 13, the second-biggest ever; and the $4.97 billion inflow in the week ended March 2, currently in the books as the all-time biggest net cash addition.

That big cash gain in the Dec. 14 week had followed an inflow of $2.03 billion for the week ended Dec. 7, of $342 million during the week ended Nov. 30 and of $598 million for the week ended Nov. 23.

Those four weeks of big inflow numbers stood in stark contrast to the $2.28 billion outflow posted during the week ended Nov. 16, which had been the most recent of six consecutive weekly cash declines totaling $7.35 billion.

Those outflows also included the $669 million cash loss seen during the week ended Nov. 9 and before that, in the week ended Nov. 2, a gaping $4.12 billion loss – easily the largest outflow seen so far this year and the third-largest on record, according to the Prospect News data analysis.

It surpassed the previous biggest 2016 outflow figure of $2.46 billion, seen during the week ended Aug. 3, and it was the third-largest cash hemorrhage seen since AMG/Lipper began tracking fund flow movements back in 1992, exceeded only by the whopping $7.07 billion that the funds lost during the week ended Aug. 6, 2014 – the biggest outflow ever – and by the second-largest all-time downturn of $4.63 billion during the week ended June 5, 2013.

Besides that giant-sized cash exodus, the recent losing streak of outflows also included declines of $48 million during the week ended Oct. 26, $160.06 million during the week ended Oct. 19 and $72 million during the week ended Oct. 12.

Year-to-date inflow grows

According to the Prospect News analysis, this week’s inflow was the fifth such improvement in the last 10 weeks, dating back to the week ended Oct. 26, balanced against five outflows during that time.

On a longer-term basis, this week’s inflow was the 28th so far this year, versus 24 outflows.

After a weak start to the year, with outflows seen in five out of the first six weeks – which were then followed by a long and strong stretch, between mid-February and late April, during which inflows had been seen in 10 weeks out of 11 – the flows seen since May turned largely inconsistent and choppy, mostly with one or two weeks of inflows alternating with a like number of outflows, before the recent prolonged downturn and then the four-week long upturn.

With 52 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow rose this week to an estimated $11.12 billion from $10.53 billion during the Dec. 21 week, the data showed.

This week’s cumulative total remains down from the $11.18 billion recorded during the Oct. 5 week, which had established a new peak cumulative net inflow for the year, surpassing the former high-water mark of $9.98 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.

IG corporates build on gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their second consecutive gain after having fallen the week before that.

It was their third such gain in in the last four weeks.

The Lipper data indicated that the funds saw net inflows of $1.16 billion in the week ended Wednesday, on top of last week’s $1.62 billion inflow.

The two inflows stood in contrast to the $81 million cash loss in the Dec. 14 week, which had followed a $2.58 billion cash gain in the Dec. 7 week.

Earlier in the year, there had been winning streaks of 16 and then 14 straight inflows, according to Prospect News’ analysis of the data.

This week’s inflow raised the funds’ year-to-date net inflow to an estimated $46.98 billion from last week’s $45.82 billion.

That established a new peak cumulative inflow figure for the year so far, according to the analysis of the data; the previous zenith had been seen the week before.

© 2015 Prospect News.
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