Junk funds lose $1.8 billion in week, snapping five-week inflow streak

By Paul Deckelman

New York, Nov. 12 – High-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, showed major net redemptions by investors in the latest reporting week – the first such outflow after five consecutive weeks before that during which inflows had been seen.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that $1.8 billion more left those weekly-reporting-only funds than had come into them during the week ended Wednesday.

That downturn came as no surprise to market-watchers who track the daily ebb and flow of cash into or out of the funds. One such market source told Prospect News that on Tuesday, the ETFs were showing a $106 million outflow on the day, while the actively managed funds generated $55 million of outflows that session.

This week’s cash loss stood in sharp contrast to the $2.05 billion cash gain that had been reported last week for the seven-day period ended Nov. 4 by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division.

That inflow, in turn, had followed a quartet of cash injections including inflows of $2.04 billion during the week ended Oct. 28 and $3.34 billion during the week ended Oct. 21 – the largest such inflow seen this year and the second-biggest on record. There were also inflows of $1.48 billion during the week ended Oct. 14 and $7.35 million during the week ended Oct. 7.

Those five weeks of inflows totaled $9.64 billion, according to a Prospect News analysis of the figures.

This week’s net outflow was only the second cash loss seen during the last 10 weeks, dating back to Sept. 9.

The only other downturn during that time was a $2.15 billion outflow reported during the week ended Sept. 30.

YTD net inflow grows

On a longer-term basis, however, with 45 weeks in the books so far this year, inflows and outflows have been somewhat more evenly distributed, with 26 inflows seen against 19 outflows.

This week’s net redemptions lowered the year-to-date net inflow total to $2.84 billion from $4.64 billion last week, Lipper said.

Reflecting the fund flows’ strength earlier in the year, the peak cumulative inflow was $11.48 billion during the week ended April 15.

Reflecting the erosion of the fund flows’ strength later on in the year, they slid back into the red in early August for the first time since early January and stayed there nearly two months. The year-to-date cumulative deficit hit its worst level during the week ended Sept. 30, with $5.0 billion of red ink, and the funds did not get back into the black until the Oct. 21st week.

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 turns negative

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile saw an outflow of around $550 million in the latest week, a market source said, versus last week’s inflow of more than $3.5 billion.

The latest week’s outflow snapped a four-week winning streak, the 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.

While the two services’ respective weekly results usually point pretty much in the same direction, that hasn’t always been the case. There have been a number of weeks so far this year in which one of the services saw an inflow and the other an outflow.

The overall net effect has been that EPFR has now seen 22 inflows so far this year, almost evenly matched against 23 outflows. That’s four fewer inflows and four more outflows than its rival, according to the Prospect News analysis of the two companies’ figures.

Corporates funds show gains

Looking at the fund flows for other asset classes, investment-grade corporate bond funds posted a net inflow of $82.67 million during the week ended Wednesday, according to Lipper.

That contrasted with last week’s outflow of $357.8 million, which had snapped a string of three consecutive inflows before that.

The latest week’s inflow was the fifth in the last 10 weeks going back to Sept. 9, evenly matched against five inflows in that time, according to a Prospect News analysis of the data.

On a year-to-date basis, inflows have now been seen in 27 weeks out of the 45 since the start of the year, against 18 weeks of outflows.

The year-to-date net inflow number grew this week to $14.44 billion from $14.36 billion last week, Lipper said.

Loan funds continue losses

Leveraged loan participation funds, which have been struggling for the most part this year and which have been generally under pressure for more than a year now, saw their 16th consecutive downturn this week as $286.58 million more left those funds than came into them.

That slide followed last week’s outflow of $395.1 million.

The long losing streak – dating back to the week ended July 29 – includes the $796 million outflow posted during the week ended Aug. 26, the biggest such cash drain seen so far this year.

The most recent inflow those funds have seen was the $208.1 million upturn in the week ended July 22.

The latest outflow brought the funds’ year-to-date net outflow figure up to $10.31 billion from $10.03 billion last week, according to Lipper.

Paul a. Harris contributed to this report

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