Junk funds lose $1.01 billion in latest week, second big outflow

By Paul Deckelman

New York, Aug. 24 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – fell for a second consecutive week this week, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $1.01 billion more left those weekly-reporting-only domestic funds than came into them during the week ended Wednesday, Aug. 23.

That outflow follows an even larger cash loss of $2.19 billion reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Aug. 16.

Those two net outflows, totaling $3.2 billion, follow – and have completely dwarfed – two net inflows totaling $319 million seen in the two weeks before that, a $124 million cash gain during the week ended Aug. 9 and a $195 million inflow for the week ended Aug. 2.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the 18th so far this year, versus 16 inflows during that time.

It was the seventh cash loss in the last 10 weeks, dating back to the week ended June 21, versus three cash gains during that time.

Besides the outflows seen this week and last and the two weeks of inflows before that, that 10-week stretch also includes a $21 million outflow in the week of July 26, which followed a $2.22 billion inflow for the funds during the week ended July 19.

And before that had come four consecutive weeks of outflows totaling $4.16 billion.

This week’s outflow widened the estimated year-to-date net outflow number to $9.55 billion from last week’s $8.54 billion.

That establishes a new year-to-date widest net outflow figure, eclipsing the previous 2017 net outflow wide point of $8.87 billion posted during the July 12 week.

The new year-to-date figure also represents the biggest cumulative net outflow number the junk funds have seen since the $9.75 billion year-to-date deficit recorded during the week ended Aug. 6, 2014.

Before their headlong plunge into negative territory during the last few months, the flows had shown a relatively strong start to the 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 reports sizable outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net outflow for this reporting week “about double” the $1.01 billion AMG/Lipper number, a market source said.

That followed an outflow last week that the source said was “in that same ballpark” as the $2.19 billion cash loss seen last week by Lipper

Those outflows stood in contrast to the preceding reporting week, ended Aug. 9, when EPFR had seen a modest net inflow to the funds “about double” the $124 million cash addition that Lipper saw that week, the source indicated.

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 point pretty much in the same general direction in terms of a given week having an inflow or an outflow. Sometimes their numbers track fairly closely, as happened to be the case last week, while in other weeks, such as this week, they may diverge widely.

And occasionally, the two companies’ numbers may even diverge completely, as most recently seen during the week ended Aug. 2, when EPFR-tracked funds had lost “in excess of $700 million,” the market source said, versus the aforementioned $195 million inflow seen that week by Lipper.

Taking those differences into account, EPFR has now seen 17 inflows so far this year and 17 outflows, versus Lipper, which, as noted, has seen 16 cash gains and 18 cash losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 36th consecutive gain overall and their 34th straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $3.39 billion during the reporting week ended Wednesday.

The week before, ended Aug. 16, had seen a $2.43 billion cash injection.

The latest inflow brought the year-to-date surge so far up to an estimated $86.57 billion this week – the peak 2017 cumulative inflow level so far, versus the $83.28 billion seen last week, the previous high point for the year.

© 2015 Prospect News.
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