Junk funds fall by $669 million on week, fifth straight net outflow

By Paul Deckelman

New York, Nov. 10 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – stayed mired deep into the red this week, recording their fifth consecutive net outflow.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $669 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday.

The outflow followed four previous straight weeks of cash declines, including the $4.116 billion loss reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Nov. 2 – easily the largest seen so far this year and the third-largest on record, according to a Prospect News analysis of the data, surpassing the previous biggest 2016 outflow figure of $2.464 billion, seen during the week ended Aug. 3.

Besides that giant-sized cash exodus, the recent losing streak of outflows also includes declines of $48 million during the week ended Oct. 26, $160.056 million during the week ended Oct. 19 and $72 million during the week ended Oct. 12.

Those five outflows, totaling $5.065 billion, followed a pair of sizable inflows – a $1.908 billion cash gain during the week ended Oct. 5 and a $2.011 billion inflow the week before that, ended Sept. 28.

According to the Prospect News data analysis, this week’s outflow was the seventh cash loss in the last 10 weeks.

On a longer-term basis, this week’s outflow was the 22nd so far this year, against 23 inflows.

Year-to-date inflow shrinks

With 45 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow fell this week to $6.110 billion from last week’s $6.779 billion, the data showed, which itself was down from the $11.175 billion recorded during the Oct. 5 week. That latter figure had established a new peak cumulative net inflow for the year so far, surpassing the former mark of $9.982 billion set during the week ended Sept. 7.

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 outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile also saw an outflow this week, with a market source estimating it to be “about $100 million more” than the AMG /Lipper figure.

Last week, the service recorded a huge cash loss, with the market source calling it “a bit higher [than the outflow reported by AMG/Lipper], but still in the ballpark.”

That mega-outflow had snapped a five-week winning streak during which EPFR had reported consecutive inflows.

Three of those inflows came during weeks when AMG/Lipper reported outflows.

During the week ended Oct. 26, for instance, the source said that EPFR’s calculations showed a $426 million inflow.

During the week ended Oct. 19, he said, the service had seen “a small inflow,” and the week before that, ended Oct. 12, a cash gain that was as “just shy of $600 million.”

EPFR’s methodology differs from AMG/Lipper’s, as its fund universe includes many mutual funds and ETFs domiciled outside of 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 frequently point pretty much in the same direction, their actual numbers may sometimes vary widely – and occasionally they may diverge completely, with one service reporting an inflow in a given week while the other sees an outflow, as had happened over the previous three weeks.

Taking those kinds of differences into account, EPFR has now tabulated 25 inflows, versus 20 outflows on the year, versus AMG/Lipper’s 23 inflows and 22 outflows.

IG corporates rebound

Looking at fund flows for other asset classes, investment-grade corporate funds got back in the black this week after having tumbled into the red last week, which followed having been in in the black for two consecutive weeks before that, the Lipper data indicated.

The funds saw net inflows of $676 billion in the week ended Wednesday, on top of the $2.495 billion outflow seen during the week ended Nov. 2.

That big loss stood in contrast to the $1.701 billion net inflow for the week ended Oct. 26 and the $2.431 billion cash addition during the Oct. 19 week – a robust comeback from the $666 million outflow seen during the week ended Oct. 12, which had snapped a 14-week winning streak of continual net inflows which had dated back to early summer.

This week’s inflow brought the funds’ year-to-date net inflow to $40. 972 billion from last week’s $40.296 billion – although that continued to lag the $42.791 billion cumulative inflow seen during the Oct. 26 week, which had established a second consecutive new peak level for the year, according to Prospect News’ analysis of the data.

© 2015 Prospect News.
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