Junk funds fall by $622 million this week, second consecutive outflow after small inflow

By Paul Deckelman

New York, Nov. 9 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – continued their recent negative trend this week, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $622 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Nov. 8.

It was the second consecutive weekly net outflow number, following the $1.2 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 Nov. 1.

Those two outflows, totaling $1.82 billion, stood in stark contrast to the $123 million net inflow seen the week before that, ended Oct. 25.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the 23rd seen so far this year, versus 22 inflows during that time.

It was the fourth cash loss seen in the last 10 weeks, dating back to the week ended Sept. 6, versus six cash gains seen during that time.

Besides the aforementioned outflows this week and last week and the inflow in the Oct. 25 week, there was also a $450 million outflow in the week ended Oct. 18, which followed four consecutive inflows before that totaling $2.91 billion – $967 million in the week ended Oct. 11, $646 million in the week ended Oct. 4, $433 million for the week ended Sept. 27, and $886 million for the week ended Sept. 20. Those four inflows, in turn, had followed a $96 million outflow in the week ended Sept. 13 and a $641 million in flow in the Sept. 6 week.

This week’s outflow raised the estimated year-to-date net outflow number to some $ 8.81 billion from last week’s $8.19 billion.

However, those cumulative outflow totals remain below the $9.82 billion of red ink seen during the Aug. 30 week, the widest year-to-date net outflow figure.

That Aug. 30 week’s year-to-date figure also represented the biggest cumulative net outflow number the junk funds had seen in recent memory, surpassing the $9.75 billion year-to-date deficit recorded the week ended Aug. 6, 2014, the previous wide mark.

Before their headlong plunge into negative territory seen for most of this year, the flows had shown a relatively strong start to the year.

They had posted six inflows during the first 10 reporting weeks of the year, reaching a peak cumulative net inflow total of $1.62 billion during the week ended Feb. 22.

They were still in positive territory for the year-to-date during the week ended March 1, with a $1.38 billion net inflow, before falling into the red the following week, ended March 8, and staying there after that.

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 outflows continuing

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw its second straight outflow this week, with $645 million more leaving the junk funds than coming into them, according to a market source.

That followed a $345 million cash loss last week, the source said.

Before that, the source said, EPFR had recorded six consecutive weeks of net inflows, most recently the $170 million cash gain seen in the week ended Oct. 25, and a “tiny” inflow observed during the Oct. 18 week.

EPFR’s methodology differs from 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 Lipper’s solely domestic orientation.

The two services’ overall respective weekly results usually point pretty much in the same general direction in terms of a given week having an inflow or an outflow; sometimes their numbers track fairly closely, as happened to be the case this week, while other times, they may differ widely, such as last week, when Lipper reported an outflow more than triple the size of the one seen by EPFR.

And occasionally, the two companies’ numbers may even diverge completely, as happened during the Oct. 18 week, with EPFR recording a small inflow and Lipper seeing a modest outflow, as noted.

Taking those differences into account, EPFR has now seen 25 inflows so far this year and 20 outflows, versus Lipper, which, as noted, has seen 22 cash gains and 23 cash losses.

IG corporates continue rebound

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their eighth consecutive weekly gain following a rare two straight weekly losses.

The Lipper calculations indicated that the funds saw a net inflow of $1.29 billion during the reporting week ended Wednesday, on the heels of a $2.85 billion upturn seen last week.

The inflows seen over the past eight weeks had followed net outflows of $25 million during the week ended Sept. 13 and $43 million during the week ended Sept. 6, which had been the first loss of the year after 35 straight net inflows the year before that and 37 inflows overall dating back to the week ended Dec. 21, 2016, according to a Prospect News analysis of the data.

This week’s inflow raised the year-to-date net inflow figure to an estimated $108.26 billion from last week’s $106.97 billion, establishing a seventh consecutive new 2017 cumulative peak level.

© 2015 Prospect News.
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