Junk funds ease by $21 million this week after $2 billion-plus inflow last week

By Paul Deckelman

New York, July 27 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – eased slightly this week, according to numbers released on Thursday, unable to sustain the momentum generated by a giant-sized net inflow recorded last week.

This week’s modest net outflow was the fifth cash loss the funds have seen in the last six weeks.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $21 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, July 26.

That stood in stark contrast to the $2.22 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 July 19.

That inflow, in turn, had followed four consecutive weeks of net outflows totaling some $4.16 billion – a $1.14 billion outflow for the week ended July 12, and before that, outflows of $1.16 billion seen during the week ended July 5, of $1.74 billion during the week ended June 28, and a $128 million outflow during the week ended June 21.

Those four most recent outflows had followed three consecutive weeks of net inflows before that totaling about $1.31 billion – a $198 million inflow for the week ended June 14, plus inflows of $586 million for the week ended June 7 and $521 million during the week ended May 31.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the 16th seen so far this year, versus 14 inflows during that time.

It was the sixth cash loss seen in the last 10 weeks, dating back to the week ended May 24, versus four inflows during that time.

Besides this week’s outflow, last week’s inflow and the aforementioned most recent four previous outflows and three inflows before that, the 10-week stretch also included a $568 million outflow during the week ended May 24.

This week’s outflow slightly widened the estimated year-to-date net outflow number to $6.67 billion from last week’s $6.65 billion.

It remained less than the $8.87 billion cumulative outflow total during the July 12 week, the 2017 net outflow wide point, as well as the biggest cumulative net outflow number the junk funds had seen since the $9.75 billion deficit recorded the week ended Aug. 6, 2014.

Before their headlong plunge into negative territory seen during the last few months, the flows had shown a relatively strong start to the year.

They had posted six inflows during the first 10 reporting weeks of the year, reaching a peak cumulative net inflow total of $1.62 billion during the week ended Feb. 22.

They were still in positive territory for the year to date during the week ended March 1, with a $1.38 billion net inflow, before falling into the red the following week and staying there after that.

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 large outflow

Another fund-tracking service, the Cambridge, Mass.-based EPFR Global, meanwhile saw a considerably larger net outflow from the high-yield funds in the latest week.

Like this week’s negative AMG/Lipper number, EPFR’s outflow followed a sizable net inflow number last week, which had been the first upturn for the funds EPFR tracks after four straight weeks on the slide before that.

However, a market source estimated the EPFR outflow number as having been “in excess of $600 million,” versus the relatively small Lipper cash loss.

EPFR’s methodology differs from 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 Lipper’s solely domestic orientation.

The two services’ overall respective weekly results usually point pretty much in the same general direction in terms of a given week having an inflow or an outflow, and sometimes they are actually quite close, as happened last week, when the source said that EPFR had seen an inflow to the U.S.-domiciled funds it tracks “roughly” in line with that tabulated by Lipper – although he added that the “headline number”(i.e., the overall EPFR global high yield fund flows number) showed an inflow for the week smaller than that seen just for those domestic funds, due to “European high-yield fund redemptions.

But because of the difference in their methodologies, those numbers can vary widely at other times, as happened this week.

And occasionally, the two companies’ numbers may even diverge completely, as most recently happened during the week ended May 3, when Lipper saw a $386 million outflow and EPFR calculated a $300 million inflow.

Taking those differences into account, EPFR has now seen 16 inflows so far this year and 14 outflows, versus Lipper, which, as noted, has seen 14 cash gains and 16 cash losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 32nd consecutive gain overall and their 30th straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $2.32 billion during the reporting week ended Wednesday.

The week before, ended July 19, had seen a $3.82 billion cash injection.

The latest inflow brought the year-to-date surge so far up to an estimated $76.91 billion this week – the peak 2017 cumulative inflow level so far, versus the $74.59 billion seen last week, the previous high point for the year.

© 2015 Prospect News.
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