Junk funds lose $2.12 billion in week, biggest loss for year so far

By Paul Deckelman

New York, March 9 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – moved deeper into negative territory with their biggest loss of the year so far in the most recent reporting week.

It was their second straight setback after four weeks of gains, according to data released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $2.119 billion more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday.

It was the largest net outflow seen so far this year, surpassing the $887 million that exited during the week ended Jan. 25. It was also the largest cash drain since the $2.284 billion deficit during the week ended Nov. 16, 2016.

This week’s huge outflow followed the more modest $240 million cash loss reported the previous Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended March 1.

The two straight weeks of outflows – totaling $2.359 billion – follow four weeks of inflows totaling $1.739 billion – the $726 million cash gain during the week ended Feb. 22, the funds’ most recent net cash addition, and before that, three additional inflows.

Those four inflows had represented a clear rebound from two weeks of outflows totaling $1.419 billion which came before that.

The new year had begun with a pair inflows totaling $1.298 billion.

No surprise

This week’s big outflow came as no real surprise to those in the market who track such numbers; prior to its release, one trader had predicted an outflow “maybe as big as $2 [billion] or $3 billion.”

Some market sources had noted the parade of sizable daily net outflows, including a $463 million net cash drain from the ETFs last Thursday, balanced by only a minimal inflow to the traditional managed funds.

The ETFs had also seen cash losses of $572 million on Tuesday, with similar-sized losses indicated during the other days of the reporting week.

In the red year to date

According to a Prospect News analysis of the data, this week’s outflow was the fourth so far this year, against six inflows.

It swung the estimated year-to-date net fund flows number back into the red – a $741 million cumulative outflow – from last week’s $1.378 billion cumulative inflow.

That plunge established a new cumulative net outflow level for the year, eclipsing the former mark of $121 million seen during the week ended Jan. 25, the only time before this week that the total net fund flows number had dipped into negative territory.

Last week’s year-to-date net inflow, meanwhile, was off from $1.618 billion during the week ended Feb. 22, which had established a new estimated peak year-to-date inflow total.

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 a net outflow during the week of some $2.678 billion, according to a market source -- its first downturn after six consecutive weeks of net inflows, including the cash gain seen last week, ended March 1, which had been “over five times” the size of the outflow recorded by AMG/Lipper, according to the market source.

The source said that the cash gain the week before that, ended Feb. 22, had been “a little north of $1 billion,” and had been “close to $1 billion” during the week ended Feb. 15.

EPFR’s methodology differs from AMG/Lipper’s as its fund universe includes many mutual funds and ETFs domiciled outside the United States, such as 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, as they did this week, their actual numbers may sometimes vary widely. Occasionally, the two companies’ numbers diverge completely, with one service reporting an inflow while the other sees an outflow, as happened last week.

Taking those differences into account, EPFR has now seen eight inflows so far this year and two outflows, versus AMG/Lipper’s six cash gains and four losses.

IG corporates continue surge

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 12th consecutive gain overall, and their 10th straight inflow seen so far this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $3.482 billion this week.

That followed the $3.045 billion inflow seen last week, ended March 1.

The latest inflow brought the year-to-date surge so far up to an estimated $25.952 billion this week – the peak 2017 cumulative inflow level so far, versus $29.434 billion last week, the previous high point.

© 2015 Prospect News.
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