Junk funds see $2.74 billion weekly loss, fourth straight outflow

By Paul Deckelman

New York, Feb. 8 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a fourth straight week, after two weeks in a row before that 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 $2.74 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 $1.75 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. 31.

And before that came inflows of $1.13 billion during the week ended Jan. 24 and 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 four outflows, totaling $8.7 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 had been 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 nearly $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 seventh cash loss in the last 10 weeks, dating back to the week ended Dec. 6, versus three gains during that time.

Besides the outflows seen over the most recent four 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.

Year-to-date loss deepens

With six 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 a net deficit of $5.86 billion.

This week’s total was the fourth successive peak loss for the year so far, versus the $3.115 billion cumulative outflow seen last week.

According to the Prospect News analysis, 2017 meantime saw 28 weeks of outflows versus 24 weeks of inflows but the cumulative funds-flow figure was considerably more lopsided than that, with an estimated final net outflow number for the year of some $15.21 billion; that more than reversed the estimated total net inflow of $11.12 billion which had been recorded in 2016.

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, Cambridge, Mass.-based EPFR Global, meanwhile also saw its fourth 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 figure came in at over $5 billion.

Last week, it had reported an outflow of more than $2 billion.

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 last 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 and occasionally the two company’a numbers may even diverge completely.

IG corporates extend gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their sixth straight gain for the year so far this week, and their 21st 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 $4.73 billion during the reporting week ended Wednesday, versus last week’s $2.2 billion cash gain.

This week’s inflow was the biggest so far this year, eclipsing the previous mark of almost $4.19 billion during the Jan. 10 week, and was one of the largest weekly inflows ever recorded for the IG funds.

This week s inflow establishes an estimated year-to-date net inflow figure of $18.88 billion, a sixth consecutive new peak for the year so far, up from last week s $14.75 billion.

Last year ended with an estimated $117.35 billion net inflow total for the year, the 14th consecutive new 2017 cumulative peak level, the analysis indicated.

© 2015 Prospect News.
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