Junk funds fall by $1.27 billion, their third consecutive outflow

By Paul Deckelman

New York, Dec. 24 – High-yield mutual funds and exchange-traded funds, considered a reliable barometer of overall junk market liquidity trends, have posted a third sizable outflow in as many weeks.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said on Thursday that $1.27 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than had come into them during the week ended Wednesday.

That followed the $3.81 billion cash hemorrhage that the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division had reported last Thursday for the week ended Dec. 16 – the funds’ biggest net outflow of the year so far and one of the largest such cash losses ever recorded, according to a Prospect News analysis of the figures.

That super-sized outflow had topped the previous biggest outflow for the year, the $3.46 billion cash bleed seen in the week before that, ended Dec. 9.

Last week’s huge outflow was also the third-largest net outflow on record at AMG/Lipper, which has been watching fund flows since 1992, the analysis indicated, exceeded only by the record $7.07 billion cash hemorrhage posted during the week ended Aug. 6, 2014 and the $4.63 billion outflow seen during the week ended June 5, 2013.

This week’s outflow was the sixth such downturn seen during the last seven weeks, the analysis indicated.

The outflows of the past three weeks, totaling $8.54 billion, followed the sole inflow seen during that seven-week stretch, a $397.6 million cash addition seen during the week ended Dec. 2. That inflow had followed three straight weekly outflows before that totaling $3.66 billion – a $501.147 million outflow during the week ended Nov. 25, a $1.36 billion outflow during the week ended Nov. 18 and a $1.8 billion outflow during the week ended Nov. 11.

This week’s net outflow was the sixth such cash loss seen during the last 10 weeks, dating back to Oct. 21, versus four inflows during that time.

YTD net outflow worsens

On a longer-term basis, with 51 weeks in the books so far this year, there have been 27 inflows and 24 outflows, the Prospect News analysis showed.

This week’s big loss deepened the year-to-date net outflow total to $7.16 billion from the previous week’s cumulative deficit of $5.89 billion. It’s the largest net outflow total this year, surpassing the previous mark, which had been recorded last week.

The big outflow seen during the week ended Dec. 9 had pushed fund flow totals back into the red, versus the $1.38 billion 2015 net inflow that had been seen the week before that, ended Dec. 2. It was the first time the year-to-date figure had been back in the red since the week ended Oct. 14, when it had shown a year-to-date net outflow of $2.78 billion.

Reflecting the fund flows’ strength earlier in the year, the peak cumulative inflow for 2015 was the $11.48 billion recorded during the week ended April 15, the analysis indicated.

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 funds did not get back into the black until the Oct. 21st 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.

Corporates funds lose again

Looking at the fund flows for other asset classes, investment-grade corporate bond funds posted a net outflow of $3.23 billion during the week ended Wednesday, according to Lipper.

It was the fifth consecutive retreat for the corporate funds, following last week’s $5.12 billion cash plunge, which in turn had followed outflows of $1.55 billion during the Dec. 9 week, $546.7 million during the Dec. 2 week and $1.46 billion during the week ended Nov. 25.

The latest week’s outflow was the sixth in the last 10 weeks going back to Oct. 21, matched against four 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 51 since the start of the year, against 23 weeks of outflows.

The year-to-date net inflow number shrank this week to $3.48 billion from $6.71 billion the previous week.

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