Junk funds up $198 million this week, third straight rise and fourth gain in past five weeks

By Paul Deckelman

New York, June 15 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – extended their gains this week, posting a third consecutive weekly upturn after having recently stumbled, according to numbers released on Thursday.

It was also the fourth net inflow the funds have seen over the past five weeks.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $198 million more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday, June 14.

That followed the $586 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 June 7 and before that, the $521 million inflow for the week ended May 31.

The three inflows – totaling some $1.31 billion – stood in contrast to the $568 million net outflow seen three weeks ago, during the week ended May 24.

Before that, the funds had posted a $650 million inflow during the week ended May 17, which, in turn had followed a pair of outflows – a $1.73 billion cash hemorrhage during the week ended May 10 and a $386 million downturn for the week ended May 3.

Year-to-date outflow narrows

After a relatively strong start to the year, March, April and then May turned choppy and changeable.

According to a Prospect News analysis of the data, this week’s inflow was the 13th so far this year, versus 11 outflows during that time.

It was the fifth cash gain in the last 10 weeks, dating back to the week ended April 12, matched against five outflows during that stretch.

It narrowed the estimated year-to-date net outflow number to $4.71 billion from $4.9 billion last week.

That 2017 net outflow figure remains narrower than the yawning $6.42 billion estimated cumulative net outflow seen during the week ended March 15 – the most accumulated red ink seen for the year so far.

Before their headlong plunge into negative territory seen during the previous three months, the flows had shown a relatively strong start to the year.

They had posted six inflows during the first 10 reporting weeks of the year, reaching a peak cumulative net inflow total of $1.62 billion during the week ended Feb. 22, and they were still in positive territory for the year to date as recently as the week ended March 1, with a $1.38 billion net inflow, before heading south the following week and staying in the red after that.

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 third straight inflow

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow to high yield funds of $624.6 million during the latest week, according to a market source.

It was the third consecutive weekly gain seen by EPFR; the source said that last week, the service had recorded an inflow that was “more than double” the $586 million inflow reported by AMG/Lipper. The week before that, ended May 31, EPFR had seen a cash gain of “a bit over $700 million.”

Those three inflows contrasted with the outflow of under $100 million that EPFR had seen during the May 24 week, which had followed what the source called an inflow “just a bit more than the [ $650 million inflow] Lipper number” during the May 17 week.

That medium-sized cash gain, in turn, had followed a $1.2 billion outflow during the week ended May 10, the source said, as well as a $300 million inflow during the week ended May 3 – which occurred during a week when AMG/Lipper, as noted, had posted a $386 million net outflow.

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.

Because of that difference, while the two services’ respective weekly results usually point pretty much in the same general direction, as has happened over the last few weeks, their actual numbers may sometimes vary widely, as was the case both this week and last week, with EPFR reporting far larger inflows than its rival.

And occasionally, the two companies’ numbers may even diverge completely, as happened during the aforementioned May 3 week and before that, during the week ended March 22 – when EPFR saw a $1.39 billion outflow, against AMG/Lipper’s $736 million inflow.

Taking those differences into account, EPFR has now seen 15 inflows so far this year and nine outflows, versus AMG/Lipper having seen 13 cash gains and 11 cash losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 26h consecutive gain overall and their 24rd straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $2.6 billion during the reporting week ended Wednesday.

That was up from the $3.73 billion recorded last week, ended June 7, and the $981 million during the week ended May 31.

Earlier in May, the IG corporate funds had seen inflows of $2.09 billion for the week ended May 24, some $3.1 billion for the week ended May 17, as well as $2.07 billion during the week ended May 10 and $1.05 billion seen during the week ended May 3.

The latest inflow brought the year-to-date surge so far up to an estimated $63.66 billion this week – the peak 2017 cumulative inflow level so far, versus $61.06 billion seen last week, the previous high point for the year.

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