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European high yield bond funds see €353M investor cash inflow

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European high yield bond funds see €353M investor cash inflow

J.P. Morgan’s weekly analysis of European high-yield funds shows a €353 million inflow for the week ended May 14. This includes an €88 million net inflow for ETFs, and a €28 million net inflow for short duration funds. The latest reading marks the thirty-sixth consecutive weekly inflow. The reading for the week ended May 7 is revised from a €151 million inflow to a €209 million inflow.

The provisional reading for April is an €1.19 billion inflow, versus a €555 million inflow in April 2013. The provisional 2014 reading is a €6.85 billion inflow, while the 2013 inflow data closed at €8.3 billion.

The latest weekly inflow is the second-largest this year (the largest was €494 million for the week ended Feb. 26). The money just keeps pouring in despite evidence of deal quality deteriorating. Moreover, much of the supply is currently bond-for-bond takouts, meaning investors are seeing high-coupon bonds exchanged for low-coupon notes. Investors though will be treated to some LBO-related financing this week, as Heat Exchangers sells three tranches to back the buyout by Triton. FRNs will be a key theme this week, with Heat Exchangers, Xella(bond refinancing), and Brakes Group (bank-to-bond) all lining up the structure.

In the U.S., retail-cash flows for high-yield funds saw $337 million ploughed into mutual funds and $135 million infused to exchange-traded funds, for a net inflow of $472 million in the week ended May 14, according to Lipper. That ETF inflow works out to roughly 29% of the sum. This is the second consecutive inflow to the asset class, for a net $840 million inflow over that span. The full-year reading now shows inflows of $4.2 billion, with roughly 97% tied to mutual-fund inflows.

Cash flows for bank loan funds were back in negative territory, at $258.94 million, in the week ended May 14, according to Lipper. It was mutual funds making the exit, at $298.835 million in outflows, while inflows of $39.89 million were tied to the exchange-traded fund segment. This is the fourth week of outflows in five weeks, for a combined $1.2 billion in outflows. Prior to April 9, Lipper reported a 95-week inflow streak, totalling $66.7 billion (there had been inflows since the week ended June 13, 2012).

As reported, J.P. Morgan only calculates flows for funds that publish daily or weekly updates of their net asset value and total fund assets. As a result, J.P. Morgan’s weekly analysis looks at around 50 funds, with total assets under management of €10 billion. Its monthly analysis takes in a larger universe of 90 funds, with €27 billion of assets under management. For a full analysis, please see “Europe receives HY fund flow calculation.” – Luke Millar