Junk funds see $1.75 billion weekly loss, third straight outflow

By Paul Deckelman

New York, Feb. 1 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a third straight week, after two weeks before that on the plus side, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $1.75 billion more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Jan. 31.

That net outflow followed the $1.13 billion cash loss reported by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Jan. 24.

And before that came a $3.08 billion cash drain during the week ended Jan. 17, which had been the first outflow of the year after two consecutive net inflows. It was the biggest cash exit those funds had seen since the $4.44 billion plunge recorded in the week ended Nov. 15, 2017.

The three outflows, totaling some $5.95 billion, follow two successive inflows amounting to $2.84 billion – $186 million in the week ended Jan. 3 and $2.651 billion for the week ended Jan. 10.

According to a Prospect News analysis of the data, that latter inflow was the largest cash infusion the junk funds had seen since the week ended Dec. 14, 2016, when $3.75 billion more came into the funds than left them. It topped the largest inflow seen in all of 2017 – the $2.38 billion cash gain recorded in the week ended last April 5.

Recent trend is negative

According to the Prospect News analysis, this week’s outflow was the sixth cash loss in the last 10 weeks, dating back to the week ended Nov. 29, versus four cash gains during that time.

Besides the outflows seen over the most recent three weeks and the aforementioned twin inflows from the first two weeks of the year, there had also been three straight outflows before that, adding up to $2.27 billion, with which the funds had closed out 2017 – a $240 million cash loss for the week ended Dec. 27 and before that, cash drains of $1.11 billion during the week ended Dec. 20 and $922 million during the week ended Dec. 13.

Those three outflows followed the final two inflows of 2017, totaling $527 million – a $217 million cash improvement during the week ended Dec 6. and a $310 million inflow for the Nov. 29 week.

Year-to-date loss deepens

With five reporting weeks in the books for 2018 so far, this week’s outflow pushed the year-to-date funds flow number deeper into the red – an estimated net deficit of $3.12 billion. It was the third successive peak loss for the year so far, versus the $1.37 billion cumulative outflow seen last week and before that, the $239 million of red ink seen during the Jan. 17 week, the funds’ first dip into negative territory on a cumulative basis.

That in turn had followed the estimated $2.84 billion year-to-date inflow total seen during the Jan. 10 week, the funds’ second peak cumulative inflow level for the year so far.

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 remains negative

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile also saw its third consecutive net outflow for the year this week, after having opened the new year with two straight weeks of net inflows.

A market source said that EPFR’s outflow came in at over $2 billion.

He said that the cash loss the service reported last week had been “roughly double” the outflow reported by AMG/Lipper, while the outflow during the Jan. 17 week had totaled “about half a billion dollars less” than the Lipper figure.

Going back a little further, the source also said that the amount of money that came into the junk funds EPFR follows during the Jan. 10 week rather than leaving them was “a little over half” of that week’s positive Lipper number.

And that followed an $860 million cash infusion seen during the Jan. 3 week.

The two straight weeks of inflows that had opened 2018 followed outflows seen over the last nine straight weeks of 2017 dating back to the Nov. 1 week, according to a Prospect News analysis of the data.

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 the Prospect News analysis of the data.

Sometimes their numbers track fairly closely, such as happened this week, when EPFR’s reported $2 billion-plus outflow was not that far off from Lipper’s $1.75 billion cash loss.

Other times, the numbers may vary widely, such as last week, when, as noted, EPFR reported an outflow about double the size of Lipper’s.

Taking those differences into account, EPFR is even with Lipper so far, each recording two inflows and three outflows.

IG corporates extend gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their fifth straight gain for this year so far this week, and their 20th consecutive weekly gain following a rare two straight weekly losses back in September, according to a Prospect News analysis of the data.

The Lipper calculations indicated that the funds saw a net inflow of $2.2 billion during the reporting week ended Wednesday, versus last week’s $3.48 billion cash gain.

Those gains had followed a $3.92 billion cash infusion during the Jan. 17 week – which was not too far down from the Jan. 10 week’s reported upturn of almost $4.19 billion – the biggest of the year so far and one of the largest weekly inflows ever recorded for the IG funds.

The year had started off with a $965 million advance.

This week’s inflow establishes an estimated year-to-date net inflow figure of $14.75 billion, a fifth consecutive new peak for the year so far, up from last week’s $12.55 billion.

© 2015 Prospect News.
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