Junk funds lose $501 million in week, third straight outflow; IG funds, loan funds also lose

By Paul Deckelman

New York, Nov. 30 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – showed major net redemptions by investors in the latest reporting week. It was the third straight week of such outflows, following five consecutive weeks before that during which inflows had been consistently seen.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $501.15 million more left those weekly reporting-only domestic funds than had come into them during the week ended this past Wednesday.

The data, which normally circulates in the market on Thursdays, was delayed this week due to the U.S. fixed-income market’s close on Thursday in observance of Thanksgiving Day.

The vast bulk of the latest weekly outflow was attributable to cash withdrawals totaling $505 million from traditional actively managed high-yield mutual funds, only partially offset by a small net inflow number for high-yield ETFs, a market source indicated.

The outflow followed the $1.36 billion net cash loss that had been reported the previous Thursday for the seven-day period ended Nov. 18 by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division.

That downturn, meantime, had been preceded by a $1.8 billion net outflow during the week ended Nov. 11.

Those losses, totaling $3.66 billion, stood in sharp contrast to the $2.05 billion inflow notched during the week ended Nov. 4. That inflow, in turn, had followed a quartet of such cash injections, including inflows of $2.04 billion during the week ended Oct. 28 and of $3.34 billion during the week ended Oct. 21 – the largest such inflow seen this year and the second-biggest on record. There were also inflows of $1.48 billion during the week ended Oct. 14 and $7.35 million during the week ended Oct. 7.

Those five weeks of inflows had totaled some $9.64 billion, according to a Prospect News analysis of the figures.

Last week’s net outflow was only the fourth such cash loss seen during the last 10 weeks, dating back to Sept. 23 against six inflows during that time.

The only other downturn during that stretch was a $2.15 billion outflow reported during the week ended Sept. 30.

YTD net inflow shrinks

On a longer-term basis, however, with 47 weeks in the books so far this year, inflows and outflows have been somewhat more evenly distributed, with 26 inflows seen against 21 outflows.

This week’s net redemptions lowered the year-to-date net inflow total to $984.20 million from $1.49 billion last week, Lipper said.

Reflecting the fund flows’ strength earlier in the year, the peak cumulative inflow was $11.48 billion during the week ended April 15.

Reflecting the erosion of the fund flows’ strength later on in the year, the cumulative fund flows number slid back into the red in early August for the first time since early January and stayed there for more than two months. The year-to-date cumulative deficit hit its worst level during the week ended Sept. 30, with $5 billion of aggregate red ink, and the funds did not get back into the black until the Oct. 21 week.

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.

Corporate funds clobbered

Looking at the fund flows for other asset classes, investment-grade corporate bond funds posted a net outflow of $1.46 billion during the week ended last Wednesday, according to Lipper, driven by the cash withdrawals from investment-grade mutual funds totaling $1.8 billion on the week, only partly offset by ETF inflows.

It was the first net outflow seen from the corporate funds following inflows seen in the two weeks before that – $945 million for the week ended Nov. 18 and $82.67 million during the week ended Nov. 11. Both of those inflows had occurred while junk bond funds were experiencing net outflows.

Those cash injections contrasted with the $357.8 million outflow during the week ended Nov. 4, which had snapped a string of three consecutive inflows before that.

The latest week’s outflow was the fifth in the last 10 weeks going back to Sept. 23, evenly matched against five inflows in that time, according to a Prospect News analysis of the data.

On a year-to-date basis, inflows have now been seen in 28 weeks out of the 47 since the start of the year, against 19 weeks of outflows.

The year-to-date net inflow number shrank this week to $13.98 billion from $15.39 billion the previous week, Lipper said.

Loan funds keep sliding

Meanwhile, leveraged loan participation funds, which have been struggling for the most part this year and which have been generally under pressure for more than a year now, saw their 18th consecutive downturn, as some $741.71 million more left those funds than came into them.

That slide followed the previous week’s outflow of $306.2 million.

The long losing streak – dating back to the week ended July 29 – includes the $796 million outflow posted during the week ended Aug. 26, the biggest such cash drain seen so far this year.

The most recent inflow those funds have seen was the $208.1 million upturn in the week ended July 22.

The latest outflow brought the funds’ year-to-date net outflow figure up to $11.36 billion from $10.69 billion last week, according to Lipper.

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