Junk funds plunge $1.74 billion this week, second straight fall

By Paul Deckelman

New York, June 29 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – fell deeper into the red this week, their second consecutive downturn after three straight weeks before that of gains, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $1.74 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, June 28.

It was the second consecutive net outflow the funds had recorded, following the $128 million setback reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended June 21.

The two outflows, totaling $1.86 billion, had followed three consecutive weeks of inflows before that, totaling $1.31 billion – a $198 million inflow for the week ended June 14 and, before that, inflows of $586 million for the week ended June 7 and $521 million during the week ended May 31.

Year-to-date outflow widens

After a relatively strong start to the year, March, April and then May turned choppy and changeable. Things appeared to have steadied in June, before the last two weeks.

According to a Prospect News analysis of the data, this week’s outflow was the 13th 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 26, matched against five inflows during that stretch.

It widened the estimated year-to-date net outflow number to $6.57 billion from $4.83 billion last week.

That established a new 2017 net outflow wide point, surpassing the previous peak outflow total of $6.42 billion seen during the week ended March 15.

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 smallish 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 only one-eighth the size of the AMG/Lipper outflow number.

As was the case with Lipper, it was the second consecutive net outflow seen after three straight net inflows.

Last week, the source said, EPFR had seen an outflow “roughly nine times bigger” than the corresponding Lipper outflow number.

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, last week, 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, as most recently happened during the week ended May 3, when Lipper saw a $386 million outflow and EPFR calculated a $300 million inflow.

Taking those differences into account, EPFR has now seen 15 inflows so far this year and 11 outflows, versus Lipper, which, as noted, has seen 13 cash gains and 13 cash losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 28th consecutive gain overall and their 26th straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $724 million during the reporting week ended Wednesday.

That relatively modest addition followed the $2.6 billion cash injection recorded last week, ended June 21.

The latest inflow brought the year-to-date surge so far up to an estimated $65.93 billion this week – the peak 2017 cumulative inflow level so far, versus $65.21 billion seen last week, the previous high point for the year.

© 2015 Prospect News.
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