Junk funds lose $72 million on week, first loss after two big inflows

By Paul Deckelman

New York, Oct. 13 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – retreated into negative territory this week, registering a modest net outflow after posting two straight large weekly net inflows before that.

Those inflows, in turn, had followed two weekly outflows.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that $72 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the reporting week ended Wednesday.

That outflow followed the $1.908 billion cash gain reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Oct. 5.

The week before that, ended Sept. 28, had seen a $2.011 billion inflow.

According to a Prospect News analysis of the data, this week’s outflow was the third cash loss in the last five weeks, and the fourth in the last 10 weeks, dating back to the week ended Aug. 10.

On a longer-term basis, this week’s outflow was the 18th so far this year, against 23 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.

The two most recent inflows, totaling some $3.919 billion, stood in stark contrast with the nearly $2.727 billion of outflows seen in the two weeks before that – $273.555 million during the week ended Sept. 21 and the $2.453 billion cash bleed during the week ended Sept. 14, one of the largest outflows seen so far this year.

Year-to-date inflow shrinks

With 41 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow eased this week to an estimated $11.103 billion from last week’s $11.175 billion, which had established a new peak cumulative net inflow for the year so far, surpassing the former mark of $9.982 billion during the Sept. 7 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 posts an inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile recorded a net inflow this week “just shy of $600 million,” according to a market source.

It was the third consecutive inflow seen by EPFR, whose cash gain last week was “a bit higher” than the $1.908 billion number reported by AMG/Lipper, the source said, while the Sept. 28 week’s cash addition “was closer to $3 billion,” he said, versus AMG/Lipper’s $2.011 billion.

Those recent inflows have represented a solid rebound from the large outflows seen over the two weeks before that, the source said – more than $1 billion during the Sept. 21 week and “more than $1 billion bigger” than the $2.453 billion cash drain reported by AMG/Lipper during the Sept. 14 week.

Those outflows, in turn, 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 $610 million inflow amount that week, or approximately $1.8 billion, with the U.S.-domiciled portion of that “more than double” the AMG/Lipper figure, or around $1.2 billion.

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

Because of that difference, 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.

Despite those differences, EPFR has now tabulated 23 inflows, versus 18 outflows on the year – the same as AMG/Lipper, although individual weeks have sometimes varied, as noted.

IG corporates turn negative

Looking at fund flows for other asset classes, investment-grade corporate funds were in the same leaky boat as the high yield funds, showing a $666 million net outflow on the week, the Lipper data indicated.

That snapped a 14-week winning streak of continual net inflows which had dated back to early summer, including last week’s $1.396 billion cash addition, which had followed a $2.334 billion inflow during the week ended Sept. 28.

The high-grade funds’ most recent previous outflow before this week 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 before that, dating back to early March. The funds had lost $761.406 million during the week ended March 2.

This week’s inflow dropped the funds’ year-to-date net inflow down to an estimated $38.659 billion from last week’s $39.325 billion – which had set a 14th consecutive new peak level for the year, according to Prospect News’ analysis of the data, up from the previous mark of $37.929 billion during the Sept. 28 week.

© 2015 Prospect News.
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