Junk funds up by $598 million in latest week, first upturn after six straight net outflows

By Paul Deckelman

New York, Nov. 28 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – moved back into the black during the latest reporting week, breaking a string of six consecutive net outflows.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Monday that some $598 million more came into those weekly-reporting-only domestic funds than left them via investor redemptions during the reporting week ended this past Wednesday, Nov. 23.

Those fund flow numbers customarily circulate around the junk bond market every Thursday afternoon; however, the market was shut down this past Thursday in observance of the Thanksgiving Day holiday in the United States. The numbers finally came out on Friday – but not that many market participants were around to see them, with Junkbondland seeing a sparsely populated, lightly traded session. Traders said that things did not really return to normal until Monday – and even that was a relatively restrained session.

The net inflow in the latest week stood in stark contrast to the $2.284 billion outflow that had been reported the previous Thursday, Nov. 17, by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Nov. 16.

That outflow had been the most recent of six consecutive weekly cash declines, including the $669 million cash loss seen during the week ended Nov. 9 and, before that, in the week ended Nov. 2, a gaping $4.116 billion loss – easily the largest outflow seen so far this year and the third-largest on record, according to a Prospect News analysis of the data.

It surpassed the previous biggest 2016 outflow figure of $2.464 billion, seen during the week ended Aug. 3, and it was the third-largest cash hemorrhage seen since AMG/Lipper began tracking fund flow movements back in 1992, exceeded only by the whopping $7.068 billion that the funds lost during the week ended Aug. 6, 2014 – the biggest outflow ever – and by the second-largest all-time downturn of $4.63 billion during the week ended June 5, 2013.

Besides that giant-sized cash exodus, the recent losing streak of outflows also included declines of $48 million during the week ended Oct. 26, $160.056 million during the week ended Oct. 19 and $72 million during the week ended Oct. 12.

According to the Prospect News data analysis, this week’s inflow was just the third gain in the last 10 weeks, dating back to the week ended Sept. 21.

The six weeks of outflows, totaling $7.349 billion, followed a pair of sizable inflows – a $1.908 billion cash gain during the week ended Oct. 5 and a $2.011 billion inflow during the week ended Sept. 28.

Those two inflows, totaling some $3.919 billion, were a big change from the nearly $2.727 billion of outflows seen in the two weeks before that – $273.555 million during the week ended Sept. 21 and the $2.453 billion cash bleed during the week ended Sept. 14.

On a longer-term basis, this week’s inflow was the 24th so far this year, versus 23 outflows.

After a weak start to the year, with outflows seen in five out of the first six weeks – which were then followed by a long and strong stretch, between mid-February and late April, during which inflows had been seen in 10 weeks out of 11 – the flows seen since May turned largely inconsistent and choppy, mostly with one or two weeks of inflows alternating with a like number of outflows, before the recent prolonged downturn.

Year-to-date inflow rises

With 47 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow rose last week to an estimated $4.424 billion from $3.826 billion during the Nov. 16 week, the data showed, although those levels still remained well down from the $11.175 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 high-water mark of $9.982 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: fourth straight outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw an outflow last week, with a market source estimating it to be some $365 million.

That was the fourth straight net outflow seen by EPFR – a losing streak that also included a cash loss of over $3 billion in the Nov. 16 week, the source said, on top of an outflow of “about $100 million more” than the corresponding AMG /Lipper figure ($669 million) during the Nov. 9 week.

And in the week ended Nov. 2, the service recorded a huge cash loss, with the market source calling it “a bit higher [than the giant-sized $4.116 billion outflow reported that week by AMG/Lipper], but still in the ballpark.”

That mega-outflow had snapped a five-week winning streak during which EPFR had reported consecutive inflows.

Three of those inflows had come during weeks when AMG/Lipper reported outflows.

During the week ended Oct. 26, for instance, the source said that EPFR’s calculations showed a $426 million inflow.

During the week ended Oct. 19, he said, the service had seen “a small inflow,” and the week before that, ended Oct. 12, a cash gain that was “just shy of $600 million.”

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many mutual funds and ETFs domiciled outside the U.S., 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 frequently 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 happened last week – EPFR’s outflow versus AMG/Lipper’s inflow – and in the aforementioned three reporting weeks ended Oct. 12, Oct. 19 and Oct. 26.

Taking those kinds of differences into account, EPFR has now tabulated 25 inflows, versus 22 outflows on the year, versus AMG/Lipper’s 24 inflows and 23 outflows so far this year, as noted.

IG corporates extend gains

Looking at fund flows for other asset classes, investment-grade corporate funds stayed in positive territory for a third consecutive week.

They had gotten back in the black during the week ended Nov. 9 after having tumbled into the red the week before that – a lapse which had followed inflows for two consecutive weeks, the Lipper data indicated.

The funds saw net inflows of $1.559 billion during the week ended this past Wednesday, on top of $469.99 million in the week ended Nov. 16 and $676 million in the Nov. 9 week – which contrasted sharply with the $2.495 billion outflow seen during the week ended Nov. 2.

That big loss had represented a clear reversal of the $1.701 billion net inflow for the week ended Oct. 26 and the $2.431 billion cash addition during the week ended Oct. 19 – a robust comeback from the $666 million outflow seen during the week ended Oct. 12, which had snapped a 14-week winning streak of continual net inflows dating back to early summer.

Before that, the funds had last previously seen an outflow of $638.599 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.

Last week’s inflow brought the funds’ year-to-date net inflow up to an estimated $43.001 billion, from $41.442 billion in the Nov. 16 week.

It also established a new peak cumulative inflow figure for the year so far, surpassing the previous zenith of $42.791 billion, which had been set during the Oct. 26 week, according to Prospect News’ analysis of the data.

© 2015 Prospect News.
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