Junk funds fall $362 million in week, follows small loss, huge inflow

By Paul Deckelman

New York, April 20 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – remained modestly negative in the latest reporting week, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $362 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, April 19.

That net outflow followed the $348 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 April 12.

Those two outflows, totaling $710 million, were in stark contrast to the $2.38 billion net inflow seen during the week ended April 5. That cash gain was not only the biggest inflow seen so far this year, easily topping the $736 million inflow recorded during the week ended March 22, but was also the largest cash injection the funds have seen since the $4.351 billon inflow for the week ended July 13, 2016.

That big inflow followed the $249 million outflow seen during the week ended March 29.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the eighth so far this year, against eight inflows.

It was also the sixth loss in the last 10 weeks, dating back to the week ended Feb. 15, versus four inflows during that stretch.

It widened the year-to-date net outflow number to $4.27 billion from $3.91 billion last week.

However, the cumulative net outflow remains narrower than the yawning $6.42 billion of red ink seen during the March 15 week, the largest cumulative net outflow level seen for the year so far.

Before their recent headlong plunge into negative territory, the flows had shown a relatively strong start to the year; they had reached a peak cumulative inflow total of $1.62 billion during the week ended Feb. 22, and were still in positive territory for the year to date as recently as the week ended March 1 before heading south the following week.

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 modest outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow during the week that was “similar” in size to that reported by AMG/Lipper, according to a market source – the second consecutive week of similar numbers.

Those two outflows followed an inflow of over $3 billion during the April 5 week, according to the market source – the first inflow that EPFR had seen after four consecutive outflows, including a cash loss during the March 29 week “in the vicinity” of the outflow that AMG/Lipper had reported, the source said.

But during the March 22 week, EPFR had seen an outflow of $1.39 billion, even as AMG/Lipper was recording its first inflow after three straight weeks of outflows.

EPFR’s methodology differs from AMG/Lipper’s as its fund universe includes many mutual funds and ETFs domiciled outside 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. Occasionally, the two companies’ numbers may even diverge completely, as happened during the March 22 week, with one service reporting an inflow in a given week while the other sees an outflow.

Taking those differences into account, EPFR has now seen nine inflows so far this year and seven outflows, versus AMG/Lipper’s eight gains and eight losses.

IG corporates see sizable gain

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 18th consecutive gain overall and their 16th straight inflow this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $1.45 billion during the reporting week ended Wednesday.

That follows the $96 million recorded last week – the smallest weekly gain seen so far this year.

That small upturn had followed the $2.71 billion recorded during the April 5 week, which – while sizable – was down from the $3.97 billion inflow during the March 29 week and was clearly well down from the $5.24 billion cash addition recorded during the March 22 week – the biggest inflow of the year so far and one of the biggest ever, surpassing the $4.93 billion inflow during the week ended Feb. 8.

The latest inflow brought the year-to-date surge so far to $43.34 billion this week – the peak 2017 cumulative inflow level so far, versus $41.89 billion seen last week, the previous high point.

© 2015 Prospect News.
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