Junk funds see $562.3 million outflow, third loss in last four weeks

By Paul Deckelman

New York, May 26 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – were back on the downside this week, market sources said Thursday.

It was the funds’ third losing week out of the last four.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $562.3 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday.

That was a clear deterioration from the $1.135 billion inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended May 18, which had followed two straight weeks of downturns totaling $3.712 billion, a $1.807 billion outflow for the week ended May 4 and then a $1.905 billion cash loss for the week ended May 11.

Those two weeks of downturns, in turn, had broken a string of four consecutive weeks of inflows totaling $1.972 billion between the week ended April 6 and the week ended April 27.

The twin outflows had also put an end to a longer stretch of 10 weeks out of the prior 11during which more cash had come into those funds than flowed out of them, according to a Prospect News analysis of the figures.

The latest week’s outflow was the ninth cash loss since the start of the year versus 12 inflows.

Year-to-date inflow declines

With 21 reporting weeks now in the books for 2016, the year-to-date net inflow fell to $6.5 billion, according to Lipper, down from $7.087 billion last week.

The year-to-date inflow total remains well down from the $9.664 billion recorded during the April 27 week, which had been the fourth consecutive new peak level for the year so far according to the analysis.

The fund flows – which started the year off with a string of outflows – reached their peak net outflow level for the year during the week ended Feb. 10, when they showed cumulative red ink of $5.165 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 fourth outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile recorded a roughly $2 billion outflow during the latest week, its fourth consecutive weekly cash loss.

Last week, a market source familiar with EPFR’s data said that the service had seen about a $150 million outflow, on top of cash bleeds coming in at nearly $2 billion in each of the prior two weeks.

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.

The latest outflow brings the total for the year seen by EPFR up to 12, versus nine weekly inflows, the exact reverse of the Lipper’s year-to-date breakdown.

While the two services’ respective weekly results usually point pretty much in the same direction, that hasn’t always been the case; besides last week, the two services’ findings have diverged two other times so far this year, and several times last year.

Corporates, loan funds rise

Looking at fund flows for other asset classes, investment-grade corporate funds saw a net inflow this week of $872.9 million, Lipper data indicated, bringing its year-to-date net inflow up to $12.2 billion.

That followed the $1.146 billion inflow seen the week before, when the year-to-date total stood at $11.283 billion.

Leveraged loan participation funds – which have mostly seen outflows so far this year – saw a $62.4 billion net inflow on the week, versus last week’s $138.8 million downturn.

The latest inflow cut the loan funds’ year-to-date net cash loss to just about $5 billion, the data indicated, versus $5.111 billion last week.

© 2015 Prospect News.
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