Junk funds see $960 million outflow for week, fifth consecutive decline; year ends with $6.27 billion loss

By Paul Deckelman

New York, Jan. 2 – High yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – posted a net outflow in the latest reporting week, ended Wednesday, Dec. 31, market sources said on Friday. It was their fifth consecutive weekly downturn.

While the fund-flow numbers generally circulate in the junk bond market each Thursday afternoon, they were delayed until Friday this time around because of the market close on Thursday for the New Year’s holiday. This was the second consecutive week in which the normal scheduled was interrupted; the numbers for the previous week had been delayed until last Friday because of the market close the day before that for Christmas.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $960 million more left those weekly-reporting-only funds than came into them during the week.

That followed the $335.5 million outflow reported the previous Thursday by Arcata, Calif.-based AMG, a unit of the Lipper analytics division of Thomson Reuters Corp., covering the seven-day period ended Dec. 24.

Those two outflows followed the $3.08 billion inflow during the week ended Dec. 17, which was the second-largest outflow seen so far this year, dwarfed only by the record $7.07 billion money hemorrhage the funds had suffered during the week ended Aug. 6 – the biggest outflow the company had seen since it began tracking the fund flows back in 1992.

Before that, there had been an outflow of $1.89 billion during the week ended Dec. 10 and an $859 million outflow recorded during the week ended Dec. 3.

During that five-week stretch, outflows have totaled $7.12 billion, according to a Prospect News analysis of the Lipper figures.

The latest week’s outflow was the sixth such retreat seen over the last seven weeks, according to the analysis, a losing pattern interrupted only by a modest $44.49 million inflow recorded during the week ended Nov. 26. Before that, the fund-tracking service had seen a $280.7 million outflow during the week ended Nov. 19.

Year-to-date outflow increases

For 2014, inflows were seen in 31 weeks, versus 21 weeks of outflows, according to the analysis.

However, despite that roughly 3-to-2 numerical edge for the inflows, cumulative fund flows for the year were negative, finishing the year $6.27 billion in the red, widening from the previous week’s $5.31 billion loss up till that point.

A key factor in the negative full-year numbers – despite all of those many weeks of gains – was the four straight weeks of massive outflows recorded between the week ended July 16 and the week ended Aug. 6, the week of the record heavy outflow, as noted.

That sea of red ink more than wiped out what had been a positive year-to-date fund-flow pattern up to that point.

After that, things turned choppy, while the year-to-date total mostly remained on the downside, according to the analysis, only edging back into the black in early November, before heading back into negative territory for good in December.

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.

In 2013 – which had 53 reporting weeks due to a statistical quirk – inflows were seen in 33 weeks, versus 20 weeks of outflows, with total net inflows for the year tallying up to about $1.27 billion, the analysis indicated.

Corporates off, post ‘14 gain

A market source meantime said that investment-grade corporate bond funds saw a $1.22 billion net outflow for the week, versus the previous week’s $2.59 billion inflow. It was the second outflow in three weeks, with the funds also showing a $79.8 million outflow during the week ended Dec. 17 – a relatively rare pattern of recent weakness, contrasting with the overwhelmingly positive pattern seen over most of the year.

The year ended showing a cumulative corporate fund inflows figure of $86.11 billion, according to a Prospect News analysis of the data, down slightly from their peak level for the year of $87.33 billion, recorded the week before.

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