Junk funds down $249 million in week, sliding from $736 million gain

By Paul Deckelman

New York, March 30 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned negative in the latest reporting week, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $249 million more left the weekly reporting-only domestic funds than came into them in the form of investor redemptions during the week ended Wednesday, March 29.

The latest net outflow followed the $736 million inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended March 22.

That inflow, in turn, had followed three consecutive weeks of outflows totaling $8.042 billion, including the $5.683 billion cash loss recorded in the week ended March 15.

That huge outflow was not only the largest cash hemorrhage so far this year, easily surpassing the $2.119 billion loss recorded just the week before that, during the week ended March 8, but it was also the second-largest money drain the junk funds have ever seen, exceeded only by the massive $7.068 billion outflow recorded during the week ended Aug. 6, 2014.

The huge outflow had been the third straight downturn the junk funds had seen, a run of red ink that followed four straight weeks of inflows totaling $1.739 billion.

Year-to-date outflow grows

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

It was also the fifth downturn in the last 10 weeks, dating back to the week ended Jan. 25, versus five inflows during that stretch.

It widened the estimated year-to-date net outflow number to $5.937 billion from $5.688 billion last week.

The cumulative net outflow was still less than the $6.424 billion seen during the March 15 week, the largest cumulative net outflow level seen for the year so far, eclipsing the $741 million former mark set during the week ended March 8.

Before the recent headlong plunge into negative territory the flows had shown a relatively strong start to the year.

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 continued outflows

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile saw a net outflow during the week “in the vicinity” of what AMG/Lipper had reported, according to a market source.

It was the fourth consecutive weekly outflow number for the service. The market source said that last week, EPFR had seen an outflow of $1.385 billion, even as AMG/Lipper was recording an inflow after three straight weeks of outflows.

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 was the case this week, their actual numbers may sometimes vary widely. Occasionally, the two companies’ numbers may even diverge completely, as happened last week, with one service reporting an inflow in a given week while the other sees an outflow.

Taking those differences into account, EPFR has now seen eight inflows so far this year and five outflows, versus AMG/Lipper having seen seven cash gains and six cash losses.

IG corporates’ rise rolls on

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 15th consecutive gain overall and their 13th straight inflow this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $3.966 billion during the reporting week ended Wednesday.

While sizable, the latest net inflow was still well down from the $5.239 billion cash addition recorded last week – the biggest inflow of the year so far and one of the biggest such numbers ever, surpassing the $4.932 billion inflow during the week ended Feb. 8.

Last week’s cash addition was not only the biggest inflow to those funds seen so far this year, but was the largest gain the corporate funds have seen in more than two years.

The latest inflow brought the year-to-date surge so far up to an estimated $39.091 billion this week – the peak 2017 cumulative inflow level so far, versus $35.125 billion seen last week, the previous high point.

© 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.