Junk funds lose $532 million in latest week, second straight outflow

By Paul Deckelman

New York, Jan. 26 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – stayed on the downside in the latest reporting week, according to data released on Thursday.

They posted their second consecutive net outflow of the new year, moving away from the strength seen in the two weekly net inflows which had opened 2017 and a total of three consecutive weeks of cash gains overall.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that $532 million more left the weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday.

That downturn came on top of the $887 million outflow which had been reported the previous Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Jan. 18.

Those twin setbacks followed the $564 million inflow seen during the week ended Jan. 11, as well as the first inflow of the year, a $734 million cash addition ion the week ended Jan. 4.

Cumulative flows fall into the red

According to a Prospect News analysis of the data, this week’s outflow was the third setback in the last 10 weeks dating back to the week ended Nov. 23, versus seven inflows during that stretch.

It dragged the year-to-date net fund flows total into the red for the first time this year, with a $121 million cumulative outflow seen in the latest week, versus last week’s $411 million net inflow figure and the $1.298 billion net inflow the week before that, the peak cumulative inflow for the year so far.

The fund flows’ relatively strong start this year before this week has been in sharp contrast to 2016, which had opened up with three consecutive outflows totaling $4.959 billion. Outflows were seen in five out of the first six weeks last year.

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 a different direction

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow “north of $1.5 billion,” according to a market source – in sharp contrast to last week, when the source said that the service had seen an outflow “about one third” the size of outflow reported by AMG/Lipper, adding that it was “mostly attributable to U.S. high-yield funds.”

That had been the first downturn seen by EPFR after seven straight weeks of reporting inflows.

Some of those seven weeks of inflows had occurred during weeks when AMG/Lipper had reported outflows.

EPFR’s methodology differs from AMG/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 AMG/Lipper’s solely domestic orientation.

Because of that difference in the EPFR and AMG/Lipper methodologies, while the two services’ respective weekly results frequently point pretty much in the same direction, their actual numbers may sometimes vary widely – during the week ended Jan. 11, for instance, EPFR reported an inflow that the market source called “roughly double” the size of the corresponding AMG/Lipper figure.

And occasionally, they may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow, as was the case this week.

However, the market source said that the latest week’s EPFR total inflow included around a $700 million inflow to the U.S.-based funds that it tracks.

Taking those differences into account, EPFR has now seen three inflows so far this year and one outflow, versus AMG/Lipper having seen two of each.

IG corporates continue surge

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their sixth consecutive gain, and their fourth straight inflow seen so far this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $1.59 billion this week.

That brought the year-to-date surge so far up to an estimated $9.698 billion – the peak 2017 cumulative inflow level so far, versus $8.108 billion last week.

It also includes last week’s $1.893 billion inflow, the $4.029 billion inflow in the week ended Jan. 11, which was the biggest those funds have seen in nearly two years, since February 2015, and the $2.186 billion inflow during the week ended Jan. 4.

© 2015 Prospect News.
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