Junk funds down by $273.56 million, second straight weekly downturn

By Paul Deckelman

New York, Sept. 22 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – were in negative territory for a second straight week, although the size of this week’s net outflow from those funds was far smaller than last week’s big cash bleed.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $273.555 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 was but a small fraction of the $2.453 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 Sept. 14.

The two outflows, totaling $2.727 billion, follow the most recent net inflow the funds have seen – the $610 million cash addition during the week ended Sept. 7.

That inflow came on the heels of a $387 million outflow during the week ended Aug. 31, while that cash loss, in turn, had followed three straight weeks of inflows totaling $2.706 billion.

According to a Prospect News analysis of the data, this week’s second consecutive outflow was also the third cash exodus in the last four weeks and the fifth in the last 10 weeks, dating back to the week ended July 20.

On a longer-term basis, this week’s outflow was the 17th so far this year, against 21 inflows.

Since May, the flows have been inconsistent and choppy, mostly with one or two weeks of inflows alternating with a like number of outflows.

Recent weeks had seen several extremely large fund flows, besides last week’s major cash drain.

Among them was the $4.351 billion cash injection seen during the week ended July 13. The Prospect News data indicated that this was the second-largest cash surge on record, only lagging the $4.967 billion inflow recorded during the week ended March 2 – the single biggest inflow seen by AMG/Lipper since it began tracking fund flows in 1992.

There was also a $2.464 billion outflow recorded during the week ended Aug. 3 – a slightly wider cash loss than last week’s big outflow.

Year-to-date inflow reduced

With 38 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow fell this week to $7.255 billion from last week’s $7.529 billion.

Those levels were well down from the $9.982 billion figure seen during the Sept. 7 week, the peak level for the year so far.

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 large outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile recorded a net outflow of over $1 billion, according to a market source.

It was the second straight large outflow seen by EPFR, which last week suffered a cash loss “more than $1 billion bigger” than the one reported by AMG/Lipper, the source said.

Those outflows contrasted with the net inflow that the service reported during the Sept. 7 week, which the source said was “a little under three times” the AMG/Lipper inflow amount that week, or approximately $1.8 billion.

That source said that about one-third of the latest week’s outflow “was attributable to funds with U.S. mandates.”

(EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many mutual funds and ETF domiciled outside of the United States, including strictly European junk funds and broader global funds versus AMG/Lipper’s solely domestic orientation).

Last week’s outflow had broken a winning streak of five consecutive overall cash gains reported by the funds that EPFR tracks.

Because EPFR’s methodology does differ from AMG/Lipper’s, including a much broader range of funds in its universe, that 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 they may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow.

So far this year, EPFR has tabulated 20 inflows versus 18 outflows, while AMG/Lipper, as noted, has seen 21 inflows and 17 outflows.

IG corporate funds continue gains

Looking at fund flows for other asset classes, investment-grade corporate funds scored their 12th straight weekly gain, with a $2.122 billion net inflow, the Lipper data indicated.

That followed a $569 million inflow during the week ended Sept. 14.

The high-grade funds’ most recent outflow was $638.599 million, during the week ended June 29 – which had been 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 up to $35.595 billion, versus last week’s $33.473 billion.

This week’s total established a 12th consecutive new peak level for the year, according to Prospect News’ analysis of the data.

© 2015 Prospect News.
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