Junk funds plunge $3.5 billion, year’s top outflow, third biggest ever

By Paul Deckelman

New York, Dec. 10 – High-yield mutual funds and exchange-traded funds turned decidedly negative in the latest reporting week, posting their biggest net outflow of the year and one of the largest cash losses ever recorded.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that $3.463 billion more left weekly reporting-only domestic funds in the form of investor redemptions than had come into them during the week ended Wednesday.

Traditional, actively managed mutual funds were responsible for 81% of the outflows, with the remainder attributable to the ETFs, Lipper said.

This week’s net outflow was the largest decline so far this year, according to a Prospect News analysis of the figures, eclipsing the previous high mark, the $2.977 billion decrease that the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division had reported for the week ended July 1.

And it was the third-biggest net outflow on record at AMG/Lipper, which has been watching fund flows since 1992, the analysis indicated, exceeded only by the record $7.068 billion cash hemorrhage posted during the week ended Aug. 6, 2014 and the $4.63 billion outflow seen during the week ended June 5, 2013. It surpassed the previous third-largest outflow of $3.43 billion, recorded during the week ended June 2, 2011.

The huge outflow easily dwarfed the $397.6 million net inflow reported last Thursday for the week ended Wednesday, Dec. 2.

This week’s outflow was the fourth downturn during the last five weeks, the analysis indicated. Last week’s inflow had followed three straight weekly outflows before that totaling $3.658 billion – a $501.147 million outflow during the week ended Nov. 25, a $1.357 billion outflow during the week ended Nov. 18 and a $1.8 billion outflow during the week ended Nov. 11.

Those outflows, in turn, had followed five consecutive weeks of inflows before that totaling $9.637 billion, according to the analysis, including the year’s biggest cash addition, a $3.343 billion inflow during the week ended Oct. 21.

This week’s net outflow was the fourth such cash loss seen during the last 10 weeks, dating back to Oct. 7, against six inflows during that time.

YTD net flows turn red

On a longer-term basis, with 49 weeks in the books so far this year, there have been 27 inflows and 22 outflows, the Prospect News analysis showed.

This week’s big loss swung the year-to-date net fund flow totals back into the red, with a cumulative deficit of $2.118 billion, versus last week’s $1.382 billion net inflow.

It was the first time the year-to-date figure has been in the red since the week ended Oct. 14, when it showed a year-to-date net outflow of $2.784 billion.

Reflecting the fund flows’ strength earlier in the year, the peak cumulative inflow for 2015 was $11.476 billion during the week ended April 15, the analysis indicated.

The cumulative fund flows number slid back into the red in early August for the first time since early January and stayed there for more than two months. The year-to-date cumulative deficit hit its worst level during the week ended Sept. 30, with $4.995 billion of aggregate red ink, and the funds did not get back into the black until the Oct. 21 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.

Corporates funds lose again

Looking at the fund flows for other asset classes, investment-grade corporate bond funds posted a net outflow of $1.55 billion during the week ended Wednesday, according to Lipper.

It was the third consecutive retreat for the corporate funds, following last week’s $546.7 million outflow and the $1.459 billion plunge during the week ended Nov. 25; the latter outflow had been driven by the cash withdrawals from investment-grade mutual funds totaling $1.8 billion that week, only partly offset by ETF inflows, according to a market source.

The recent three weeks of outflows had followed inflows seen in the two weeks before that – $945 million for the week ended Nov. 18 and $82.668 million during the week ended Nov. 11. Both of those inflows had occurred while junk bond funds were experiencing net outflows.

Those cash injections contrasted with the $357.8 million outflow during the week ended Nov. 4, which had snapped a string of three consecutive inflows before that.

The latest week’s outflow was the fifth in the last 10 weeks going back to Oct. 7, evenly matched against five inflows in that time, according to a Prospect News analysis of the data.

On a year-to-date basis, inflows have now been seen in 28 weeks out of the 49 since the start of the year, against 21 weeks of outflows.

The year-to-date net inflow number shrank this week to $11.831 billion from $13.381 billion the previous week.

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