Junk funds see $1.798 billion inflow, ending three-week losing streak

By Paul Deckelman

New York, July 7 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – saw their first net inflow this week, following three consecutive weekly outflows, market sources said Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $1.798 billion more came into those weekly-reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday.

That cash gain follows three straight outflows totaling some $4.196 billion – the $1.628 billion outflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended June 29, which itself had followed a $766 million outflow in the week ended June 22. Earlier, there had been a $1.802 billion outflow seen during the week ended June 15.

Those three outflows stood in contrast to the two straight weeks of inflows – totaling some $893.153 million – that had preceded them.

These included the $748.153 million inflow during the week ended June 8 and the $145 million inflow during the week ended June 1.

The fund flows have been choppy over the last several months, according to a Prospect News analysis of the figures.

In May, the funds had seen a $562.3 million downturn during the week ended May 25 and before that a $1.135 billion inflow during the week ended May 18, which had followed two straight weeks of downturns totaling $3.712 billion – a $1.807 billion outflow for the week ended May 4 and then a $1.905 billion cash loss for the week ended May 11.

Those two weeks of downturns, in turn, had broken a string of four consecutive weeks of inflows totaling nearly $1.972 billion between the week ended April 6 and the week ended April 27.

The four weeks of April inflows had meantime been part of a longer stretch of 10 weeks out of the prior 11, dating back to the week ended Feb. 17, during which more cash had come into those funds than flowed out of them, according to the analysis.

The latest week’s inflow 15th cash gain since the start of the year versus 12 outflows.

Year-to-date inflow grows

With 27 reporting weeks now in the books for 2016, the year-to-date net inflow grew to an estimated $5.02 billion from last week’s $3.223 billion total.

Despite the sizable inflow, the year-to-date inflow total remains well below the $9.664 billion zenith recorded during the April 27 week, which had been the fourth consecutive new peak level for the year so far, according to the Prospect News analysis.

The fund flows – which started the year off with a string of outflows – reached their peak net outflow level for the year during the week ended Feb. 10, when they showed cumulative red ink of $5.165 billion.

For all of 2015, meanwhile, there had been 28 inflows and 24 outflows, the analysis showed, producing a net outflow for the year of $7.046 billion.

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 major inflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile recorded an inflow of over $2 billion, in contrast to three straight weekly cash losses – last week’s $3.36 billion outflow, a cash drain of over $2.5 billion in the June 22 week and a more than $3 billion cash hemorrhage in the June 15 week, a market source said.

The week before that, ended June 8, had seen a $2.5 billion inflow, the market source said.

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

The difference in the methodologies means that while the two services’ respective weekly results usually point pretty much in the same direction, their actual numbers may sometimes vary widely – and occasionally may diverge completely, with one service reporting an inflow while the other sees an outflow or vice versa.

The latter scenario has happened four times so far this year, and several times last year.

IG corporate funds gain

Looking at fund flows for other asset classes, investment-grade corporate funds got some of their swagger back, with a $907 million net inflow, the Lipper data indicated.

Last week, they had finally weakened after a long string of successes, with a net outflow of $638.599 million, 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 back up to an estimated $15.496 billion from $4.589 billion last week.

This week’s total established a new peak level for the year, according to Prospect News’ analysis of the data, versus the $15.227 billion seen during the week ended June 22.

© 2015 Prospect News.
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