Junk funds gain $217 million in latest week, second straight rise after four-week outflow streak

By Paul Deckelman

New York, Dec. 7 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – posted a second straight modest rise this week after having broken out of their month-long negative rut last week, according to the most recently released numbers.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $217 million more came into those weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Wednesday, Dec. 6.

That net inflow follows the $310 million cash infusion reported by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Nov. 29, which had been the first such gain seen after four consecutive weeks of net 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 a Prospect News analysis of the data, 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 four outflows stood in stark contrast to the $123 million inflow seen during the week ended Oct. 25, which had been the most recent previous week before the past two weeks in which the funds had shown a net gain.

Year-to-date outflow narrows

According to the Prospect News analysis, this week’s inflow was the 24th seen so far this year, versus 25 outflows during that time.

It was the fifth cash gain seen in the last 10 weeks, dating back to the week ended Oct. 4, versus five cash losses seen during that time.

Besides the inflows seen this week and last plus the aforementioned four straight outflows and the inflow in the Oct. 25 week, that 10-week stretch also includes a $450 million outflow in the week ended Oct. 18, as well as inflows of $967 million in the week ended Oct. 11 and $646 million in the Oct. 4 week.

The latter two inflows were part of a string of four consecutive cash injections totaling $2.91 billion which also included gains of $433 million for the week ended Sept. 27 and $886 million inflow for the week ended Sept. 20, both of which would fall outside the last 10 weeks’ timeframe.

This week’s inflow cut the estimated year-to-date net outflow number to some $12.93 billion from last week’s $13.15 billion, according to the analysis.

This week’s total was also down from the $13.46 billion cumulative net outflow recorded during the Nov. 22 week – the widest year-to-date net outflow figure for 2017 so far.

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

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 sixth straight net outflow this week, with the amount of money leaving the junk funds rather than coming into them pegged at over $1.5 billion, according to a market source.

That followed the roughly $535 million outflow that the source had seen last week.

Besides those outflows the last two weeks, EPFR had also seen 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 those outflows, EPFR had recorded six consecutive weeks of net inflows, most recently the $170 million cash gain seen in the Oct. 25 week, and what the source called a “tiny” inflow observed during the Oct. 18 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 during the Nov. 22 week, when EPFR reported an outflow more than 10 times the size of the one seen by Lipper.

And occasionally, the two companies’ numbers may even diverge completely, as happened this week and last, with EPFR recording additional outflows both weeks while Lipper saw a pair of modest inflows breaking a losing streak, as noted.

Taking those differences into account, EPFR has now seen 25 inflows so far this year and 24 outflows, versus Lipper, which, as noted, has seen 24 cash gains and 25 cash losses in the 49 weeks since the start of the year.

IG corporates gain

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 12th consecutive weekly gain following a rare two straight weekly losses.

The Lipper calculations indicated that the funds saw a net inflow of $622 million during the reporting week ended Wednesday, on the heels of a $1.16 billion upturn seen last week.

The inflows seen over the past 12 weeks have followed net outflows of $25 million recorded during the 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 $115.01 billion from last week’s $114.39 billion, establishing an 11th consecutive new 2017 cumulative peak level, the analysis indicated.

© 2015 Prospect News.
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