Junk funds see $1.05 billion outflow in week, second straight decline

By Paul Deckelman

New York, Feb. 11 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – continued on their mostly negative trend for the year so far, posting a large outflow in the latest week, their second straight downturn and their fifth in the six weeks since the start of the new year.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that $1.048 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 followed the modest $40.897 million outflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Feb. 3.

Those outflows contrasted with the $883.3 million inflow seen the week before that, ended Jan. 27 – the first and so far only cash addition in 2016.

It followed sizable outflows totaling $4.959 billion that were recorded during the first three weeks of the new year.

This week’s outflow was the eighth seen in the last 10 weeks dating back to the week ended Dec. 9, 2015, against just two inflows during that time, according to a Prospect News analysis of the figures.

These included the two biggest net outflows of last year, the analysis indicated – the $3.811 billion cash hemorrhage seen for the week ended Dec. 16, which had followed and surpassed the $3.463 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 $7.068 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.

Year-to-date outflow widens

With six reporting weeks in the books for 2016, the year-to-date net outflow figure rose to $5.165 billion from $4.116 billion last week.

The new total is the peak cumulative net outflow level for 2016 so far, surpassing the previous red-ink high point of $4.959 billion seen during the Jan. 20 week,

In 2015, meanwhile, there were 27 inflows and 25 outflows, the Prospect News analysis showed, producing a net outflow for the year of $7.046 billion.

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 outflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile saw an outflow that a market source said was in excess of $2 billion, with funds based in the United States “accounting for about two-thirds of the headline number.”

That follows a $614 million outflow EPFR reported last week.

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many non-U.S.-domiciled mutual funds and ETFs, including strictly European junk funds and broader global funds, versus AMG/Lipper’s solely domestic orientation.

While the two services’ respective weekly results usually point pretty much in the same direction, that hasn’t always been the case; while AMG/Lipper saw a sizable inflow in the Jan. 27 week, EPFR reported what the source called a “tiny” outflow of around $4 million that week, largely due to “investors souring on European corporates.”

Accordingly, EPFR has yet to record an inflow six weeks into the new year.

The latest week’s outflow was the ninth that it has seen in the past 10 weeks, a losing streak broken only by a roughly $25 million inflow during the Dec. 30 week.

Corporates funds break losing streak

Looking at the fund flows for other asset classes, investment-grade corporate bond funds posted a net inflow of $551.385 million during the week ended Wednesday, according to Lipper.

That snapped a string of 11 consecutive weekly downturns for the corporate funds, a losing streak dating back to the week ended Nov. 23, including the outflow of $1.451 billion reported last week.

Before that, the funds had seen a $1.187 billion outflow in the Jan. 27 week, which had followed a $442 million outflow in the Jan. 20 week, a $740 million cash loss during the Jan. 13 week and a $1.126 billion downturn during the Jan. 6 week with which they had started the new year.

With six Thursday-to-Wednesday reporting weeks of the new year complete, the year-to-date outflow total for 2016 fell to $4.396 billion from last week’s $4.947 billion, its peak red-ink level for the year so far.

The corporate funds had closed out 2015 during the week ended Dec. 30 with a $1.656 billion outflow.

Before the inflow reported this week, the most recent previously reported net inflow to the funds came during the week ended Nov. 18, when $945 million more came into the funds than left them.

Loan funds’ slide continues

Meanwhile, leveraged loan participation funds, which struggled all of the last two years, have remained under pressure so far this year, according to the latest Lipper data.

Some $510.454 million more left those funds than came into them during the week ended Wednesday.

It was the loan funds’ sixth consecutive outflow so far in 2016, versus no inflows in that time.

The losing streak includes outflows of $405 million last week, of $783.7 million during the week ended Jan. 27; of $743 million during the week ended Jan. 20; of $402.2 million during the week ended Jan. 13; and of $560.1 million during the week ended Jan. 6.

The latest week’s outflow brings the year-to-date net outflow total to $3.405 billion, the peak cumulative loss for the year so far, having widened from the previous peak level of $2.894 billion last week, according to a Prospect News analysis of the data.

On a longer-tem basis, the latest outflow was the loan funds’ 29th consecutive downturn, according to the analysis.

The long losing streak dates back to the week ended July 29; the most recent inflow those funds have seen was the $208.1 million upturn in the week ended July 22.

In 2015, the funds racked up a net outflow total of $16.406 billion.

© 2015 Prospect News.
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