Junk funds lose $128 million this week, snapping three-week inflow

By Paul Deckelman

New York, June 22 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – hit a roadblock this week after three consecutive weeks of gains, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $128 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, June 21.

This week’s net outflow, however modest, stood in contrast to the $198 million net inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended June 14.

Last week’s cash gain had been the third in a row and the fourth in the prior five weeks – a stretch that also included a $586 million inflow during the week ended June 7 and, before that, a $521 million inflow for the week ended May 31.

Those three inflows – totaling some $1.31 billion –had followed a $568 million outflow for the week ended May 24, the most recent previous outflow prior to this week’s cash loss.

Year-to-date outflow widens

After a relatively strong start to the year, March, April and then May turned choppy and changeable.

According to a Prospect News analysis of the data, this week’s outflow was the 12th so far this year, versus 13 inflows during that time.

It was the fifth cash loss in the last 10 weeks, dating back to the week ended April 19, matched against five inflows during that stretch.

It widened the estimated year-to-date net outflow number to $4.83 billion from $4.71 billion last week.

That 2017 net outflow figure remains narrower than the yawning $6.42 billion estimated cumulative net outflow seen during the week ended March 15 – the most accumulated red ink seen for the year so far.

Before their headlong plunge into negative territory seen during the previous three months, the flows had shown a relatively strong start to the year.

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 sizable outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net outflow from high-yield funds in the latest week that a market source estimated was “roughly nine times bigger” than the corresponding AMG/Lipper outflow number.

As was the case with Lipper, it was the first net outflow after three straight net inflows.

Last week, the source said, EPFR had reported an inflow of $624.6 million. For the week ended June 7, the inflow had been “more than double” the $586 million inflow reported by Lipper. The week before that, ended May 31, EPFR had seen a cash gain of “a bit over $700 million.”

Those three inflows contrasted with the outflow of under $100 million that EPFR had seen during the May 24 week, which had followed what the source called an inflow “just a bit more than the Lipper number” of a $650 million inflow during the May 17 week.

EPFR’s methodology differs from 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 Lipper’s solely domestic orientation.

Because of that difference, while the two services’ respective weekly results usually point pretty much in the same general direction, as has happened over the last few weeks, their actual numbers may sometimes vary widely, as was the case this week, with EPFR reporting a far larger outflow than its rival, and over the two weeks before that, which saw considerably bigger EPFR inflow numbers than Lipper’s reported inflows.

And occasionally, the two companies’ numbers may even diverge completely, with one reporting an inflow, the other an outflow.

Taking those differences into account, EPFR has now seen 15 inflows so far this year and 10 outflows, versus Lipper, which, as noted, has seen 13 cash gains and 12 cash losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 27th consecutive gain overall and their 25th straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $1.55 billion during the reporting week ended Wednesday.

That was followed the $2.6 billion recorded last week, ended June 14, and $3.73 billion in the week ended June 7.

The latest inflow brought the year-to-date surge so far up to an estimated $65.21 billion this week – the peak 2017 cumulative inflow level so far, versus $63.66 billion seen last week, the previous high point for the year.

© 2015 Prospect News.
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