Junk funds lose $19 million in latest reporting week, first outflow after four straight inflows

By Paul Deckelman

New York, Dec. 22 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned slightly negative this week, posting their first net outflow after four straight weeks of net inflows, which in turn had followed a string of six straight net outflows before that.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said Thursday that some $19 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the reporting week ended on Wednesday.

That was a far cry from the net $3.75 billion inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Dec. 14.

Last week’s inflow was one of the biggest that AMG/Lipper has ever seen, ranking fourth on the all-time list. It was exceeded only by the $4.25 billion inflow seen during the week ended Oct. 26, 2011, the third-biggest inflow; the $4.351 billion cash gain seen during the week ended July 13 of this year, the second-biggest; and the $4.967 billion inflow also set earlier this year, in the week ended March 2, currently in the books as the all-time biggest inflow.

That big cash addition followed the $2.034 billion inflow for the week ended Dec. 7 and before that, inflows of $342 million during the week ended Nov. 30 and $598 million for the week ended Nov. 23.

The four weeks of inflows, totaling some $6.724 billion, stood in stark contrast to the $2.284 billion outflow posted during the week ended Nov. 16 – the most recent of six consecutive weekly cash declines totaling $7.349 billion.

Those outflows also included the $669 million cash loss seen during the week ended Nov. 9 and before that, in the week ended Nov. 2, a gaping $4.116 billion loss – easily the largest outflow seen 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 it was the third-largest cash hemorrhage seen since AMG/Lipper began tracking fund flow movements back in 1992, 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.

Besides that giant-sized cash exodus, the recent losing streak of outflows also included 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.

According to the Prospect News data analysis, this week’s outflow was the sixth setback in the last 10 weeks, dating back to the week ended Oct. 19, versus four inflows during that time.

On a longer-term basis, this week’s outflow was the 24th so far this year, versus 27 inflows.

After a weak start to the year, with outflows seen in five out of the first six weeks – which were then followed by a long and strong stretch, between mid-February and late April, during which inflows had been seen in 10 weeks out of 11 – the flows seen since May turned largely inconsistent and choppy, mostly with one or two weeks of inflows alternating with a like number of outflows, before the recent prolonged downturn and now, the current three-week-long upturn.

Year-to-date inflow falls

With 51 reporting weeks now in the books for 2016, the year-to-date cumulative net inflow fell this week to an estimated $10.531 billion from $10.55 billion during the Dec. 14 week, the data showed. Those remain 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 high-water 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.

IG corporates recover

Looking at fund flows for other asset classes this week, investment-grade corporate funds turned higher, after having fallen last week, their second gain in in the last three weeks.

The Lipper data indicated that the funds saw net inflows of $1.62 billion in the week ended Wednesday, versus last week’s $81 million cash loss, which had followed a $2.583 billion cash gain in the Dec. 7 week.

The corporate funds have also recently seen net outflows of $1.302 billion during the week ended Nov. 30 – which had followed inflows of $1.559 billion in the week ended Nov. 23, on top of cash gains of $469.99 million in the week ended Nov. 16 and $676 million in the Nov. 9 week.

Those three inflows had contrasted sharply with the $2.495 billion outflow seen during the week ended Nov. 2.

During the months before that, there had been winning streaks of 16 and then 14 straight inflows, according to Prospect News’ analysis of the data.

This week’s inflow raised the funds’ year-to-date net inflow to an estimated $45.821 billion from last week’s $44.201 billion.

That established a new peak cumulative inflow figure for the year so far, according to the Prospect News analysis of the data, surpassing the previous zenith of $44.282 billion during the Dec. 7 week.

Overall currency loss

This week’s small outflow from the junk funds was part of a massive year-end exodus of money from both stock and bond funds generally.

Lipper said that all equity funds reported net outflows totaling some $19.911 billion – $14.329 billion of that coming from domestic equity funds and $5.582 billion of it from non-domestic equity funds

Net outflows from all taxable bond funds totaled $1.953 billion, Lipper said.

Lipper indicated that the data this past week may overstate the degree of outflows because of end-of-year payouts by funds that are typically then reinvested quickly and will likely show up in future weeks as an inflow.

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