Junk funds see $2.11 billion outflow in latest week, second straight downturn for year so far

By Paul Deckelman

New York, Jan. 14 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – posted their second consecutive net outflow this week and their fifth such downturn in the last six weeks.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that $2.11 billion more left those weekly reporting-only domestic funds in the form of investor redemptions than had come into them during the week ended Wednesday.

That cash loss continued the negative trend seen last week, which saw an $809.1 million net outflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Jan. 6.

The twin outflows seen in the last two weeks have stood in sharp contrast to the $114.1 million inflow that was recorded during the week ended Dec. 30.

The outflows the past two weeks also marked a return to the recent negative pattern that the funds have seen, apart from that rare upturn; before the Dec. 30 week’s inflow, the funds had suffered three consecutive weeks of outflows, totaling some $8.54 billion.

The most recent of these was the $1.27 billion in net redemptions reported during the week ended Dec. 23.

Before that had come the two biggest net outflows of last year, according to a Prospect News analysis of the figures – the $3.81 billion cash hemorrhage seen for the week ended Dec. 16, which had followed and surpassed the $3.46 billion cash bleed seen in the week before that, ended Dec. 9.

The latter two outflows were, respectively, also the third- and fourth-largest net outflows on record at AMG/Lipper, which has been watching fund flows since 1992, the analysis indicated. They were exceeded only by the record $7.07 billion cash plunge posted during the week ended Aug. 6, 2014 and the $4.63 billion outflow seen during the week ended June 5, 2013.

This week’s outflow was the eighth seen in the last 10 weeks, dating back to the week ended Nov. 11, against just two inflows during that time. Besides the cash addition in the Dec. 30 week, the only other inflow seen during that time period was $397.6 million during the week ended Dec. 2, with outflows in all of the intervening weeks.

Year-to-date outflow widens

With two reporting weeks in the books for 2016 – and both showing outflows, with no inflows reported so far – the year-to-date net outflow figure grew this week to $2.92 billion from $809.1 million last week.

In 2015, meanwhile, there had been 27 inflows and 25 outflows in that time, the Prospect News analysis showed, producing a net outflow for the year of $7.05 billion.

That was down slightly from the peak net outflow for the year of $7.16 billion reported during the week ended Dec. 23.

Reflecting the fund flows’ strength earlier in last year, the peak cumulative inflow for 2015 was the $11.48 billion recorded during the week ended April 15, the analysis indicated.

Reflecting the erosion of the fund flows’ strength later on in the year, 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. They got back in the black during the week ended Oct. 21, but finally fell back into negative territory for good during the week ended Dec. 9.

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.

In 2014, inflows had been seen in 31 of the year’s weeks, versus 21 weekly outflows – but the year ended with a $6.27 billion net outflow.

Corporate funds lose again

Looking at the fund flows for other asset classes, investment-grade corporate bond funds posted a net outflow of $740 million during the week ended Wednesday, according to Lipper.

It was the eighth consecutive retreat for the corporate funds, a losing streak dating back to the week ended Nov. 25.

The funds had seen a $1.13 billion downturn last week to start 2016, on top of the $1.66 billion outflow with which they had closed out 2015 during the week ended Dec. 30.

The corporate funds had also lost $3.23 billion during the week ended Dec. 23, as well as the $5.12 billion cash plunge seen during the week ended Dec. 16 – the biggest outflow from the corporates seen last year and one of the biggest downturns ever.

The most recently reported net inflow to the funds was reported during the week ended Nov. 18, when $945 million more came into the funds than left them. That followed a modest $82.67 million inflow during the week ended Nov. 11.

Those have been the only two inflows seen during the 10-week stretch dating back to the week ended Nov. 11, matched against eight outflows seen during that time, according to a Prospect News analysis of the data.

With two Thursday-to-Wednesday reporting weeks of the new year complete, the year-to-date outflow total for 2016 stands at $1.87 billion, up from last week’s $1.13 billion cumulative red ink total.

For 2015, when inflows were seen in 28 weeks, against 24 weeks of outflows, net inflows for the year totaled just $1.83 billion – a far cry from the robust $86.11 billion net inflow figure recorded during 2014.

© 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.