Junk funds lose $160 million on week, second straight outflow after two big inflows

By Paul Deckelman

New York, Oct. 20 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – stayed in negative territory for a second consecutive week, again registering a modest net outflow after having posted two straight large weekly net inflows before that.

Those inflows, in turn, had followed two consecutive weekly outflows.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $160.06 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the reporting week ended Wednesday, on top of the $72 million cash loss reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Oct. 12.

The two outflows, totaling $232 million, followed a pair of sizable inflows – a $1.91 billion cash gain during the week ended Oct. 5 and a $2.01 billion inflow the week before that, ended Sept. 28.

According to a Prospect News analysis of the data, this week’s outflow was the fourth cash loss in the last six weeks and the fifth in the last 10 weeks, dating back to the week ended Aug. 17.

On a longer-term basis, this week’s outflow was the 19th so far this year, against 23 inflows.

Since May, the flows have been inconsistent and choppy, mostly with one or two weeks of inflows alternating with a like number of outflows.

The two most recent inflows, totaling some $3.92 billion, stood in stark contrast with the nearly $2.73 billion of outflows seen in the two weeks before that – $273.56 million during the week ended Sept. 21 and the $2.45 billion cash bleed during the week ended Sept. 14, one of the largest outflows seen so far this year.

Year-to-date inflow shrinks

With 42 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow eased this week to $10.94 billion, the data indicated, from last week’s $11.10 billion, which itself was down from $11.18 billion recorded during the Oct. 5 week. That latter figure had established a new peak cumulative net inflow for the year so far, surpassing the former mark of $9.98 billion set during the week ended Sept. 7.

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 posts an inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile recorded “a small inflow,” according to a market source.

It was the fourth consecutive inflow seen by EPFR, whose cash gain last week was “just shy of $600 million,” the source said.

During the Oct. 5 week, EPFR’s inflow was “a bit higher” than the $1.91 billion number reported by AMG/Lipper, the source said, while the Sept. 28 week’s cash addition “was closer to $3 billion,” he said, versus AMG/Lipper’s $2.01 billion.

Those recent inflows have represented a solid rebound from the large outflows seen over the two weeks before that, the source said – more than $1 billion during the Sept. 21 week and “more than $1 billion bigger” than the $2.45 billion cash drain reported by AMG/Lipper during the Sept. 14 week.

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many mutual funds and ETFs domiciled outside of the United States, such as strictly European junk funds and broader global funds, versus AMG/Lipper’s solely domestic orientation.

Because of that difference, while the two services’ respective weekly results usually point pretty much in the same direction, their actual numbers may sometimes vary widely – and occasionally they may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow, as has happened over the past two weeks.

Taking those differences into account, EPFR has now tabulated 24 inflows versus 18 outflows on the year, versus AMG/Lipper’s 23 inflows and 19 outflows so far this year.

IG corporates rebound

Looking at fund flows for other asset classes, investment-grade corporate funds were back in the black this week, the Lipper data indicated, with a $2.43 billion net inflow on the week.

That was a robust comeback from the $666 million net outflow seen last week, which had snapped a 14-week winning streak of continual net inflows which had dated back to early summer, including the most recent previous inflow, the $1.40 billion cash addition during the week ended Oct. 5.

The high-grade funds’ most recent previous outflow before last week’s downturn had been $638.60 million during the week ended June 29 – which had been the first cash loss seen after 16 consecutive weeks of cash gains for the IG corporate funds before that, dating back to early March. The funds had lost $761.41 million during the week ended March 2.

This week’s inflow raised the funds’ year-to-date net inflow to $41.09 billion, versus last week’s $38.66 billion.

This week’s cumulative total established a new peak level for the year, according to Prospect News’ analysis of the data, up from $39.33 billion during the Oct. 5 week, which had set a 14th consecutive new weekly peak level for the year.

© 2015 Prospect News.
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