Junk funds plunge $1.2 billion, overshadowing last week’s small inflow

By Paul Deckelman

New York, Nov. 2 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – sank deeply into the red this week way, overshadowing last week’s small net inflow, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $1.2 billion more left those weekly reporting-only domestic funds than came into them during the week ended Wednesday, Nov. 1.

That big net outflow was in stark contrast to the $123 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 Oct. 25.

That inflow had followed a $450 million outflow during the week ended Oct. 18, which had been the first setback seen after four consecutive weekly gains totaling $2.91 billion: a $967 million inflow for the week ended Oct. 11 and before that inflows of $646 million during the week ended Oct. 4, $433 million for the week ended Sept. 27 and $866 million in the week ended Sept. 20.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the 22nd so far this year, versus 22 inflows during that time.

It was the fourth cash loss in the last 10 weeks, dating back to the week ended Aug. 30, versus six cash gains seen during that time.

This week’s outflow was the largest that funds have seen since the Aug. 16 week.

It raised the estimated year-to-date net outflow number to $8.18 billion from last week’s $6.99 billion.

Those cumulative outflow totals remain below the $9.82 billion of red ink seen during the Aug. 30 week, the widest year-to-date net outflow figure.

That Aug. 30 week’s year-to-date figure also represented the biggest cumulative net outflow number the junk funds had seen in recent memory, surpassing the $9.75 billion year-to-date deficit recorded the week ended Aug. 6, 2014, the previous wide mark.

Before their headlong plunge into negative territory seen for most of this year, 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.

IG corporates continue rebound

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their seventh consecutive weekly gain following a rare two straight weekly losses.

The Lipper calculations indicated that the funds saw a net inflow of $2.85 billion during the reporting week ended Wednesday, on the heels of a $3.26 billion upturn last week.

The inflows seen over the past seven weeks had followed net outflows of $25 million during week ended Sept. 13 and $43 million during the week ended Sept. 6, which had been the first loss of the year after 35 straight net inflows this year before that and 37 inflows overall dating back to the week ended Dec. 21, 2016, according to a Prospect News analysis of the data.

This week’s inflow raised the year-to-date net inflow figure to an estimated $106.97 billion from last week’s $104.12 billion, establishing a sixth consecutive new 2017 cumulative peak level.

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