Junk funds lose $386 million this week, third downturn in four weeks

By Paul Deckelman

New York, April 27 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – returned to the downside in the latest reporting week, posting their third outflow in the last four weeks, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $386 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, May 3.

That outflow follows a $291 million net inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended April 26.

That inflow had followed two consecutive outflows totaling $710 million – the $362 million cash loss during the week ended April 19 and a $348 million outflow recorded during the week ended April 12.

Those two outflows were in stark contrast to the $2.38 billion net inflow seen during the week ended April 5. That cash gain was not only the biggest inflow seen so far this year but also the largest cash injection the funds have seen since the $4.351 billon inflow for the week ended July 13, 2016.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the ninth so far this year, evenly matched against nine inflows during that time.

It was also the seventh cash loss in the last 10 weeks, dating back to the week ended March 1, versus just three inflows during that stretch.

It raised the year-to-date net outflow number to $4.37 billion from $3.98 billion last week.

That 2017 net outflow figure remains narrower than the yawning $6.42 billion estimated net outflow seen during the March 15 week – the most cumulative red ink seen for the year so far.

Before their headlong plunge into negative territory seen during the past two months, the flows had shown a relatively strong start to the year.

They had reached a peak cumulative net inflow total of $1.62 billion during the week ended Feb. 22, and they were still in positive territory for the year to date as recently as the week ended March 1, with a $1.38 billion net inflow, before heading south the following week and staying there after that.

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 modest inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw an inflow of “just under $300 million” during the week, according to a market source.

It was the second straight inflow seen by EPFR, following on the heels of a more than $1 billion cash gain seen last week.

That upturn followed two straight weeks in which the source said EPFR had seen net outflows “similar” in size to those which were concurrently reported by AMG/Lipper.

Those two outflows had followed an inflow of over $3 billion during the April 5 week, according to the market source – the first inflow that EPFR had seen after four consecutive weekly net outflows, including a cash loss during the March 29 week “in the vicinity” of the outflow that AMG/Lipper had reported, the source said.

But during the March 22 week, EPFR saw an outflow of $1.39 billion even as AMG/Lipper was recording its first inflow after three straight weeks of 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, while the two services’ respective weekly results usually point pretty much in the same direction, as had mostly been the case in recent weeks, their actual numbers may sometimes vary widely, as was the case last week, with AMG/Lipper reporting a smallish inflow and EPFR calculating a large cash gain.

Occasionally, the two companies’ numbers may even diverge completely, as happened this week and before that, during the March 22 week, with one service reporting an inflow in a given week while the other sees an outflow.

Taking those differences into account, EPFR has now seen 11 inflows so far this year and seven outflows, versus AMG/Lipper having seen nine cash gains and nine cash losses.

IG sees sizable gain

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 20th consecutive gain overall and their 18th straight inflow this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $1.05 billion during the reporting week ended Wednesday.

That follows the $4.7 billion recorded last week, the $1.45 billion the week before that, ended April 19 and the $96 million notched during the week ended April 12 -- the smallest weekly gain seen so far this year.

The latest inflow brought the year-to-date surge so far up to an estimated $49.09 billion this week – the peak 2017 cumulative inflow level so far, versus $48.04 billion seen last week, the previous high point for the year.

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