Junk funds fall $348 million on week after year’s biggest inflow

By Paul Deckelman

New York, April 13 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned modestly negative in the latest reporting week, failing to maintain the previous week’s strongly positive tone, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $348 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, April 12.

That outflow followed the $2.375 billion net inflow reported the previous Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended April 5 – a cash gain that was not only the biggest inflow so far this year but also the largest cash injection since the $4.351 billon inflow for the week ended July 13, 2016.

Last week’s big inflow had followed a $249 million outflow during the week ended March 29.

That outflow, in turn, followed a $736 million inflow during the March 22 week.

And before that had come three consecutive weeks of outflows totaling $8.042 billion, including a $5.683 billion cash loss recorded in the week ended March 15 – not only the largest cash hemorrhage so far this year but also the second-largest money drain the junk funds have ever seen, exceeded only by the massive $7.068 billion outflow recorded during the week ended Aug. 6, 2014.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the seventh this year, against eight inflows.

It was also the fifth loss in the last 10 weeks, dating back to the week ended Feb. 8, versus five inflows during that stretch.

It widened the year-to-date net outflow number to $3.910 billion from $3.562 billion last week.

However, the cumulative net outflow remains narrower than the yawning $6.424 billion of red ink seen during the March 15 week, the largest cumulative net outflow level seen for the year so far.

Before their recent headlong plunge into negative territory, the flows had shown a relatively strong start to the year. They had reached a peak cumulative inflow total of $1.618 billion during the week ended Feb. 22 and were still in positive territory for the year to date as recently as the week ended March 1, with a $1.378 billion net inflow, before heading south the following 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.

EPFR sees modest outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow during the week that was “similar” in size to that which was reported by AMG/Lipper, according to a market source.

That followed the previous week’s inflow of over $3 billion, according to the market source – the first inflow that EPFR had seen after four weekly net outflows, including a cash loss during the March 29 week “in the vicinity” of the outflow that AMG/Lipper had reported, the source said.

But during the March 22 week, EPFR saw an outflow of $1.385 billion even as AMG/Lipper recorded its first inflow after three weeks of outflows.

EPFR’s methodology differs from AMG/Lipper’s as its fund universe includes many mutual funds and ETFs domiciled outside 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 usually point pretty much in the same direction, as has been the case both this week and over the previous two weeks, their actual numbers may sometimes vary widely. Occasionally, the two companies’ numbers may even diverge completely, as happened during the March 22 week, with one service reporting an inflow while the other sees an outflow.

Taking those differences into account, EPFR has now seen nine inflows so far this year and six outflows, versus AMG/Lipper’s eight cash gains and seven cash losses.

IG corporates see small gain

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 17th consecutive gain overall and their 15th straight inflow this year, with no outflows yet recorded for 2017.

The Lipper data indicated that the funds saw net inflows of $96 million during the reporting week ended Wednesday – the smallest weekly gain seen so far this year.

That follows the $2.706 billion recorded last week, which – while sizable – was down from the $3.966 billion inflow during the March 29 week and was clearly well down from the $5.239 billion cash addition recorded during the March 22 week – the biggest inflow of the year so far and one of the biggest ever.

The latest inflow brought the year-to-date surge so far to $41.893 billion – the peak 2017 cumulative inflow so far, versus $41.797 billion seen last week, the previous high point.

© 2015 Prospect News.
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