Junk funds lose $525 million in week, eighth straight 2018 outflow

By Paul Deckelman

New York, March 8 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for an eighth straight week after two weeks on the plus side to begin the year, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $525 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, March 7.

That net outflow followed the $703 million cash loss reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp’ s Lipper analytics division for the seven-day period ended Feb. 28.

A string of outflows

Before that, the service had reported a $335 million outflow for the week ended Feb 21 – and a yawning $6.31 billion cash bleed for the week ended Feb. 14.

According to a Prospect News analysis of the data, that giant-sized outflow was not only by far the biggest cash drain seen so far this year, it was also the second-largest outflow on record since Lipper began tracking fund flows back in 1992, exceeded only by the record $7.07 billion that the funds lost during the week ended Aug. 6, 2014.

The eight successive recent outflows, totaling $16.56 billion, followed two inflows amounting to $2.84 billion that started the year.

Recent trend is negative

According to the Prospect News analysis, this week’s outflow was the eighth cash loss in the last 10 weeks, dating back to the week ended Jan. 3, versus just two cash gains during that time – the ones which had started the year.

With 10 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 to an estimated cumulative net deficit of $13.73 billion, its eighth successive peak loss for the year so far, versus last week’s $13.2 billion cumulative outflow.

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 slide continuing

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

A market source said that this week’s outflow clocked in at around $3 billion.

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 week ended Nov. 1, 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, the two services’ numbers track fairly closely, while other times, the numbers may vary widely, as happened this week, with only a relatively modest outflow seen by Lipper but a sizable cash loss reported by EPFR.

Occasionally, the two companies’ numbers may even diverge completely, with one reporting an inflow while the other posts an outflow.

However, even taking those differences into account, EPFR and Lipper are even so far this year, each having recorded two inflows and eight outflows.

IG corporates on the slide

Looking at fund flows for other asset classes during the week, investment-grade corporate funds saw a $740 million net outflow figure.

That cash loss stood in contrast to the $1.37 billion net inflow those funds had seen last week.

This week’s outflow was the second seen in the last four weeks by the corporate funds, a relative rarity.

The funds had seen a $1.57 billion inflow during the Feb. 21 week, which had followed a $790 million cash loss during the Feb. 14 week. That outflow had been the first downturn after 21 straight weeks of gains dating back to mid-September, according to a Prospect News analysis of the data.

Those gains had included the $4.73 billion for the seven-day period ended Feb. 7 – the biggest improvement seen so far this year, eclipsing the previous mark of $4.19 billion recorded during the Jan. 10 week, and one of the largest weekly inflows ever recorded for those IG funds.

This week’s funds downturn cuts the estimated year-to-date net inflow figure for the IG corporates to $20.29 billion from last week’s $21.03 billion total, the peak level for the year so far.

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