Junk funds gain $564 million in latest week, third straight gain

By Paul Deckelman

New York, Jan. 12 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – continued 2017 on a positive note on Thursday, reporting a second straight weekly net inflow of the year, against no outflows so far, and a third consecutive cash gain, continuing their rebound from a small net outflow seen in late December.

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

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $564 million more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended on Wednesday.

That gain followed the $734 million inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Jan. 4, as well as the final inflow seen during 2016 – a $592 million cash addition during the week ended Dec. 28.

The funds had shown a $19 million outflow the week before that, ended Dec. 21.

Big streaks of inflows and outflows

That small outflow had snapped a four-week winning streak before that during which a net total of $6.724 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.

Year stays in a positive mode

According to the Prospect News analysis, this week’s inflow was the seventh improvement in the last 10 weeks, dating back to the week ended Nov. 9.

The new year thus remains in positive territory in terms of year-to-date fund flows, which total $1.298 billion.

That is the peak cumulative inflow for the year so far, up from last week’s $734 million.

That was in sharp contrast to 2016, which had opened up with three consecutive outflows totaling $4.959 billion. Outflows were seen in five out of the first six weeks last year.

On a longer-term basis, last year ended with 28 weekly inflows versus 24 outflows.

In the last reporting week of 2016, ended Dec. 28, the year-to-date cumulative net inflow had risen to an estimated $11.123 billion from $10.531 billion during the Dec. 21 week, the data showed.

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 seventh straight inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw an inflow in the week ended Wednesday that a market source called “roughly double” the size of the corresponding AMG/Lipper figure.

It was the seventh consecutive net inflow the service had reported.

EPFR began the new year by reporting an inflow last week that was “a couple of hundred million [dollars] more” than the one reported by AMG/Lipper, the market source said.

Before that, during the week ended Dec. 28, inflows had totaled nearly $2.107 billion, which followed a cash gain of $1.915 billion during the week ended Dec. 21. There was also an inflow of $3 billion during the week ended Dec. 14, while for the week ended Dec. 7, EPFR’s inflow figure was “close to” the $2.034 billion AMG/Lipper inflow figure, according to the market source.

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

Because of that 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 in a given week while the other sees an outflow.

Taking those differences into account, EPFR tabulated 30 inflows during 2016 against 22 outflows, versus AMG/Lipper’s 28 inflows and 24 outflows.

IG corporates continue surge

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their fourth consecutive gain.

The Lipper data indicated that the funds saw net inflows of $4.029 billion in the week ended Wednesday.

That inflow – the biggest those funds have seen in nearly two years, since February 2015 – came on top of last week’s $2.186 billion inflow, a $1.162 billion inflow in the week ended Dec. 28 and a $1.62 billion cash gain in the week ended Dec. 21.

As was the case with the high yield fund flows, this week’s inflow keeps the IG funds on positive turf in year-to-date terms, with an estimated $6.215 billion having come into those funds so far this year.

The funds had ended 2016 with an estimated $46.983 billion cumulative net inflow, their peak level for the year, the analysis indicated.

© 2015 Prospect News.
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