Junk funds post $809.1 million outflow; corporate funds also lose

By Paul Deckelman

New York, Jan. 7 – High-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, started the new year off on a negative note, posting their fourth net outflow in the last five weeks.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that $809.1 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday.

That cash loss stood in sharp contrast to the $114.1 million inflow that had been reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Dec. 30.

It also marked a return to the recent negative pattern that the funds have seen apart from that rare upturn; before last week’s reported inflow, the funds had suffered three consecutive weeks of outflows totaling $8.54 billion.

The most recent of these was the $1.27 billion of net redemptions reported during the week ended Dec. 23.

Before that had come the two biggest net outflows of the year, according to a Prospect News analysis of the figures – the $3.81 billion cash hemorrhage seen for the week ended Dec. 16, which had followed and surpassed the $3.46 billion cash bleed seen in the week before that, ended Dec. 9.

The latter two outflows were, respectively, also the third- and fourth-largest net outflows on record at AMG/Lipper, which has been watching fund flows since 1992, the analysis indicated. They were exceeded only by the record $7.07 billion cash plunge posted during the week ended Aug. 6, 2014 and the $4.63 billion outflow seen during the week ended June 5, 2013.

This week’s outflow was the seventh seen in the last 10 weeks, dating back to the week ended Nov. 4, against just three inflows during that time. Besides last week’s cash addition, the only other inflows seen during that time period were $397.6 million during the week ended Dec. 2 and $2.05 billion during the week ended Nov. 4, with outflows in all of the intervening weeks.

$809 million outflow for 2016

With just one reporting week in the books for 2016, the year-to-date net outflow figure of $809.1 million is identical to the weekly cash decline.

In 2015, meanwhile, there were 27 inflows and 25 outflows, the Prospect News analysis showed, producing a net outflow for the year of $7.05 billion.

That was down slightly from the peak net outflow for the year of $7.16 billion reported during the week ended Dec. 23.

Reflecting the fund flows’ strength earlier in the year, the peak cumulative inflow for 2015 was the $11.48 billion recorded during the week ended April 15, the analysis indicated.

Reflecting the erosion of the fund flows’ strength later on in the year, the cumulative fund flows number slid back into the red in early August for the first time since early January and stayed there for more than two months. They got back in the black during the week ended Oct. 21 but finally fell back into negative territory for good during the week ended Dec. 9.

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.

In 2014, inflows had been seen in 31 of the year’s weeks, versus 21 weekly outflows – but the year ended with a $6.27 billion net outflow.

EPFR sees outflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile saw an outflow that a market source said was “about half” of that reported by AMG/Lipper.

As was the case with the latter service’s fund flows figure, the outflow EPFR reported was its fourth in the last five weeks.

It had followed a roughly $25 million inflow during the Dec. 30 week and, before that, three consecutive cash losses of $2.8 billion in the Dec. 23 week, over $5 billion in the Dec. 16 week and, during the Dec. 9 week, around the same size as the $3.4 billion-plus cash bleed that AMG/Lipper had seen.

Like AMG/Lipper, EPFR had also seen an inflow the week before that, ended Dec. 2, of around $1 billion.

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, as they have in recent weeks, that hasn’t always been the case; there were a number of weeks last year in which one of the services saw an inflow and the other an outflow.

The overall net effect of those divergences was that EPFR ended the year having seen 24 inflows, versus 28 outflows – three fewer inflows and three more outflows than its rival, according to a Prospect News analysis of the two companies’ figures.

Corporates funds lose again

Looking at the fund flows for other asset classes, investment-grade corporate bond funds posted a net outflow of $1.13 billion during the week ended Wednesday, according to Lipper.

It was the seventh consecutive retreat for the corporate funds, a losing streak dating back to the week ended Nov. 25.

The funds had seen a $1.66 billion downturn last week to close out 2015.

The corporate funds had also lost $3.23 billion during the week ended Dec. 23 and $5.12 billion during the week ended Dec. 16, the biggest outflow from the corporates seen last year and one of the biggest downturns ever.

The most recently reported net inflow to the funds occurred during the week ended Nov. 18, when $945 million more came into the funds than left them. That followed a modest $82.67 million inflow during the week ended Nov. 11.

Those have been the only two inflows seen during the 10-week stretch dating back to the week ended Nov. 4, matched against eight outflows seen during that time, according to a Prospect News analysis of the data.

With the first Thursday-to-Wednesday reporting week of the new year complete, the year-to-date outflow total for 2016 stands at $1.13 billion, the same as the weekly total.

For 2015, when inflows were seen in 28 weeks against 24 weeks of outflows, net inflows for the year totaled just $1.83 billion – a far cry from the robust $86.11 billion net inflow figure recorded during 2014.

Loan funds’ slide continues

Meanwhile, leveraged loan participation funds, which struggled all of the last two years, remained under pressure to start the new year. Some $560.1 million more left those funds than came into them during the week ended Wednesday, according to Lipper.

It was the loan funds’ 24th consecutive downturn, according to a Prospect News analysis of the data.

That included sizable losses seen over the previous several weeks – $754.8 million during the week ended Dec. 30, $1.28 billion during the week ended Dec. 23 and $2.04 billion during the week ended Dec. 16, the biggest weekly cash drain seen last year.

The long losing streak dates back to the week ended July 29; the most recent inflow those funds have seen was the $208.1 million upturn in the week ended July 22.

The outflow this week, the first reporting week of the year, put the year-to-date net outflow figure so far at an identical $560.1 million.

In 2015, the funds racked up a net outflow total of $16.41 billion.

In 2014, they had seen $17.26 billion of cumulative red ink for the year.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.