Junk funds plummet by $2.284 billion on week, sixth straight outflow

By Paul Deckelman

New York, Nov. 17 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – continued to languish deep in the red this week, recording their sixth consecutive net outflow.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that $2.284 billion 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 five previous weeks of cash declines, including the $669 million cash 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. 9.

The week before that, ended Nov. 2, saw gaping $4.116 billion loss – easily the largest so far this year and the third-largest on record, according to a Prospect News analysis of the data.

It surpassed the previous biggest 2016 outflow figure of $2.464 billion, seen during the week ended Aug. 3 and was exceeded only by the whopping $7.068 billion that the funds lost during the week ended Aug. 6, 2014 – the biggest outflow ever – and by the second-largest all-time downturn of $4.63 billion during the week ended June 5, 2013.

The six consecutive outflows, totaling $7.349 billion, follow a pair of sizable inflows – a $1.908 billion cash gain during the week ended Oct. 5 and a $2.011 billion inflow during the week ended Sept. 28.

Those two inflows, totaling some $3.919 billion, stood in stark contrast with the nearly $2.727 billion of outflows seen in the two weeks before that – $273.555 million during the week ended Sept. 21 and the $2.453 billion cash bleed during the week ended Sept. 14.

According to the Prospect News data analysis, this week’s outflow was the eighth cash loss in the last 10 weeks, dating back to the week ended Sept. 14.

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

Outflow had been expected

This week’s sizable outflow came as no real surprise in Junkbondland; market participants noted the high-yield world has recently been taking its lumps more often than not, with mostly outflows from the funds seen on a day-to-day basis.

Before the weekly fund-flow numbers were released, one trader presciently predicted that the widely expected outflow could top the $2 billion mark, while a second concurred that it would likely be in a range of $1.5 billion to $2 billion, or possibly above that.

Year-to-date inflow shrinks

With 46 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow plunged this week to an estimated $3.826 billion from last week’s $6.11 billion, the data showed, which itself was well 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 sees third 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 over $3 billion.

It was the third straight net outflow seen by EPFR.

Last week, the market source said that the cash loss had been “about $100 million more” than the corresponding AMG /Lipper figure.

And in the week ended Nov. 2, the service recorded a huge cash loss, with the market source calling it “a bit higher [than the $4.116 billion 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 had come during weeks when AMG/Lipper reported outflows.

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.

Taking those kind of differences into account, EPFR has now tabulated 25 inflows, versus 21 outflows on the year, versus AMG/Lipper’s 23 inflows and 23 outflows.

IG corporates extend gains

Looking at fund flows for other asset classes, while the junk funds continued to struggle, investment-grade corporate funds stayed in positive territory for a second consecutive week.

They had gotten back in the black last week after tumbling into the red the week before that – a lapse which had followed inflows for two consecutive weeks, the Lipper data indicated.

The funds saw net inflows of $469.99 million in the week ended Wednesday, on top of last week’s $676 million cash gain – which contrasted sharply with the $2.495 billion outflow seen during the week ended Nov. 2.

This week’s inflow brought the funds’ year-to-date net inflow to an estimated $41.442 billion from last week’s $40.972 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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