Junk funds lose $1.11 billion in latest week, second straight outflow after two weeks of inflows

By Paul Deckelman

New York, Dec. 21 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – remained squarely in negative territory this week, their second straight week on the downside after having posted gains over two weeks before that, according to the numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $1.11 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Dec. 20.

It was the funds’ second consecutive net outflow, continuing the negative trend seen the week before with a $922 million cash loss reported by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Dec. 13.

Before those two outflows totaling some $2.03 billion, the funds had recorded a pair of net inflows totaling $527 million, including a $217 million cash improvement during the week ended Dec 6 and a $310 million inflow for the week ended Nov. 29.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the 27th seen so far this year, versus 24 inflows recorded during that time.

It was the seventh cash loss seen in the last 10 weeks, dating back to the week ended Oct. 18, versus just three cash gains seen during that time.

Besides the aforementioned outflows seen this week and last and the inflows seen the previous two weeks, that 10-week timeframe period also contained four consecutive weeks of outflows before that totaling $6.47 billion.

That losing streak included outflows of $209 million during the week ended Nov. 22 and an enormous $4.44 billion cash loss during the week ended Nov. 15 – the second-biggest outflow this year, according to the Prospect News analysis, surpassed only by the $5.68 billion cash hemorrhage seen during the week ended March 15. The Nov. 15 outflow was also the fourth-biggest ever recorded since AMG/Lipper began tracking fund flows back in 1992.

Before that outsized outflow had also come cash losses of $622 million during the week ended Nov. 8 and $1.2 billion during the week ended Nov. 1.

Those downturns followed a $123 million inflow during the week ended Oct. 25 and a $450 million outflow in the week ended Oct. 18.

This week’s outflow widened the estimated year-to-date net outflow number to some $14.97 billion from last week’s $13.85 billion, according to the analysis.

This week’s total also established a second consecutive new widest year-to-date net outflow figure for 2017 so far, surpassing the previous wide point set last week.

Before their headlong plunge into negative territory seen for most of this year, the fund flows had shown a relatively strong start to 2017.

They had posted six inflows during the first 10 reporting weeks of the year, reaching a peak cumulative net inflow total of $1.62 billion during the week ended Feb. 22.

They were still in positive territory for the year-to-date during the week ended March 1, with a $1.38 billion net inflow, before falling into the red the following week, ended March 8, and staying there after that, the analysis indicated.

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 outflows continuing

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile saw its eighth straight net outflow this week, with the amount of money leaving the junk funds rather than coming into them pegged “in excess of $5 billion,” according to a market source.

He said that most of the money leaving flowed out of “funds with U.S. mandates.”

The latest week’s big outflow followed the $2.37 billion cash loss that the source had seen last week and the roughly $1.65 billion outflow seen during the Dec. 6 week.

Going back into November, EPFR had also seen a $535 million shortfall during the Nov. 29 week and an additional four straight outflows before that as well – a more than $2.2 billion outflow during the Nov. 22 week, a cash loss “in excess of $6 billion” during the Nov. 15 week, as well as outflows of $645 million during the Nov. 8 week and $345 million during the Nov. 1 week, the source said.

Before all of those outflows, EPFR had recorded six consecutive weeks of net inflows, most recently the $170 million cash gain seen in the Oct. 25 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.

The two services’ overall respective weekly results usually – but not always – point pretty much in the same general direction in terms of a given week having an inflow or an outflow, according to a Prospect News analysis of the data.

Sometimes their numbers track fairly closely, as happened to be the case during the Nov. 8 and Nov. 15 weeks, while other times, they may differ widely, such as this week and last week, when EPFR reported outflows of roughly five times the size and more than twice the size, respectively, of the ones seen by Lipper during the corresponding weeks.

And occasionally, the two companies’ numbers may even diverge completely, as happened during the Dec. 6 and the Nov 29 weeks, when EPFR recorded additional outflows both weeks while Lipper saw a pair of modest inflows in each of those weeks, as noted.

Taking those differences into account, EPFR has now seen 25 inflows so far this year and 26 outflows, versus Lipper, which, as noted, has seen 24 cash gains and 27 cash losses in the 51 weeks since the start of the year.

IG corporates extend gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 14th consecutive weekly gain following a rare two straight weekly losses, according to a Prospect News analysis of the data.

The Lipper calculations indicated that the funds saw a net inflow of $1.14 billion during the reporting week ended Wednesday, on the heels of a $755 million upturn seen last week.

The inflows seen over the past 14 weeks have followed net outflows of $25 million recorded 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 weekly net inflows this year before that and 37 weekly inflows overall dating back to the week ended Dec. 21, 2016 according to the Prospect News analysis.

This week’s inflow raised the year-to-date net inflow figure to an estimated $116.91 billion from last week’s estimated $115.77 billion, establishing a 13th consecutive new 2017 cumulative peak level, the analysis indicated.

© 2015 Prospect News.
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