Junk funds see $766 million outflow, second straight weekly loss

By Paul Deckelman

New York, June 23 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – saw their second consecutive weekly outflow, and third cash loss in the last five weeks, market sources said Thursday.

The outflows the past two weeks followed two straight inflows.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $766 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 cash loss followed the $1.802 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 June 15.

Those two outflows, totaling $2.568 billion, stood in stark contrast to the two straight weeks of inflows – totaling $893.153 million – that had preceded it.

These included the $748.153 million inflow during the week ended June 8 and the $145 million inflow during the week ended June 1.

The fund flows have been choppy in recent weeks, according to a Prospect News analysis of the figures.

In May, the funds had seen a $562.3 million downturn during the week ended May 25 and before that a $1.135 billion inflow during the week 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 nearly $1.972 billion between the week ended April 6 and the week ended April 27.

The four weeks of April inflows had meantime been part of a longer stretch of 10 weeks out of the prior 11, dating back to the week ended Feb. 17, during which more cash had come into those funds than flowed out of them, according to the analysis.

The latest week’s outflow was the 11th cash loss since the start of the year, versus 14 inflows.

Year-to-date inflow reduced

With 25 reporting weeks now in the books for 2016, the year-to-date net inflow fell to an estimated $4.85 billion, down from the $5.616 billion that Lipper saw 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 Prospect News 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.

For all of 2015, meanwhile, there were 28 inflows and 24 outflows, the 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 major outflow

Another fund-tracking service, Cambridge. Mass.-based EPFR Global, meanwhile recorded an outflow of over $2.5 billion in the latest reporting week, on top of last week’s cash loss, described by a market source as being “north of $3 billion.”

The week before that, ended July 8, had seen a $2.5 billion inflow, the market source said.

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 market source said that this week. “redemptions from the European high yield funds were at a 37-week high, dating back to last fall.”

The difference in the methodologies means that while the two services’ respective weekly results usually point pretty much in the same direction, their actual numbers may sometimes vary widely – and occasionally may diverge completely, with one service reporting an inflow while the other sees an outflow, or vice versa.

The latter scenario has happened four times so far this year and several times last year.

IG corporate funds rise

Looking at fund flows for other asset classes, investment-grade corporate funds saw a net inflow this week of $1.839 billion, the Lipper data indicated, bringing its year-to-date net inflow up to an estimated $15.228 billion.

It was the 16th consecutive week of cash gains for the IG corporate funds.

That followed the $499 million inflow Lipper saw last week, when the year-to-date total stood at $13.389 billion.

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