Junk funds lose $887 million in week, first outflow after three gains

By Paul Deckelman

New York, Jan. 19 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – suffered their first setback of the new year in the latest reporting week, according to data released on Thursday.

That retreat followed the two weeks of inflows which had opened 2017 and three consecutive weeks of cash gains overall, as the flows had rebounded from a small outflow seen in late December.

That outflow was the first downturn after four weeks of inflows, which in turn had followed a string of six successive outflows before that.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $887 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended on Wednesday.

That downturn followed the $564 million inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Jan. 11, as well as the first inflow of the year, a $734 million cash addition in the week ended Jan. 4.

Inflow total falls

According to a Prospect News analysis of the data, this week’s outflow was the third setback in the last 10 weeks dating back to the week ended Nov. 16, versus seven inflows during that stretch.

It cut the year-to-date inflow total to $411 million from last week’s $1.298 billion, the peak cumulative inflow for the year so far.

The fund flows’ relatively strong start this year is in sharp contrast to 2016, which had opened up with three consecutive outflows totaling $4.959 billion.

On a longer-term basis, last year ended with 28 weekly inflows versus 24 outflows.

In the last reporting week of 2016, ended Dec. 28, the year-to-date cumulative net inflow had risen to an estimated $11.123 billion from $10.531 billion during the Dec. 21 week, the data showed.

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 finally sees a loss

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw an outflow in the week ended Wednesday “about one-third” the size of outflow reported by AMG/Lipper, a market source said, adding that it was “mostly attributable to U.S. high-yield funds.”

It was the first downturn seen by EPFR after seven weeks of reporting inflows.

During the week ended Jan. 11, the service reported an inflow that the market source called “roughly double” the size of the corresponding AMG/Lipper figure.

Some of the seven weeks of inflows had occurred during weeks when AMG/Lipper had reported outflows.

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 in the EPFR and AMG/Lipper methodologies, 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.

Taking those differences into account, EPFR tabulated 30 inflows during 2016 against 22 outflows, versus AMG/Lipper’s 28 inflows and 24 outflows.

IG corporates continue surge

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their fifth consecutive gain.

The Lipper data indicated that the funds saw net inflows of $1.893 billion.

It was the third straight inflow seen so far this year, with no outflows yet recorded.

The year-to-date surge, totaling an estimated $8.108 billion – the peak 2017 cumulative inflow level so far – also includes the $4.029 billion inflow in the week ended Jan. 11, which was the biggest those funds have seen in nearly two years, since February 2015.

That came on top of the $2.186 billion inflow during the week ended Jan. 4.

The funds had ended 2016 with an estimated $46.983 billion cumulative net inflow, their peak level for the year, the Prospect News analysis indicated.

© 2015 Prospect News.
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