Junk funds lose $277 million, third outflow after two smaller inflows

By Paul Deckelman

New York, Aug. 31 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – fell for a third consecutive week this week, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $277 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Aug. 30.

That net outflow follows the cash loss of $1.01 billion reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Aug. 23, which in turn had followed an even larger outflow of $2.19 billion during the week ended Aug. 16.

Those three net outflows, totaling $3.47 billion, follow – and have completely dwarfed – two net inflows totaling $319 million seen in the weeks before that – a $124 million cash gain reported during the week ended Aug. 9 and a $195 million inflow for the week ended Aug. 2.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the 19th so far this year, versus 16 inflows during that time.

It was the seventh cash loss in the last 10 weeks, dating back to the week ended June 28, versus three cash gains seen.

Besides the outflows seen this week and last and the two weeks of inflows before that, as noted, that 10-week stretch also includes a $21 million outflow in the week of July 26, which had followed a $2.22 billion inflow for the funds during the week ended July 19.

And before that had come four consecutive weeks of outflows totaling $4.16 billion, including a $1.14 billion outflow for the week ended July 12 and, before that, outflows of $1.16 billion during the week ended July 5 and of $1.74 billion during the week ended June 28.

This week’s outflow widened the estimated year-to-date net outflow number to $9.82 billion from last week’s $9.55 billion.

That establishes a second consecutive new year-to-date widest net outflow figure, eclipsing the previous 2017 net outflow wide point set last week.

The new year-to-date figure also represents the biggest cumulative net outflow number the junk funds had seen going back to at least 2011, surpassing the $9.75 billion year-to-date deficit recorded the week ended Aug. 6, 2014.

Before their headlong plunge into negative territory 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, ended March 8, 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 an inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw a net inflow for this reporting week a little bit over $400 million, a market source said.

That followed two straight net outflows – last week’s cash loss was “about double” the $1.01 billion AMG/Lipper outflow number, the market source said.

That followed an outflow in the Aug. 16 week that the source said was “in that same ballpark” as the $2.19 billion cash loss seen that week by Lipper

Those outflows stood in contrast to the preceding reporting week, ended Aug. 9, when EPFR had seen a modest net inflow to the funds “about double” the $124 million cash addition that Lipper saw that week, the source indicated.

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. But occasionally the two companies’ numbers may even diverge completely, as happened this week.

Taking those differences into account, EPFR has now seen 18 inflows so far this year and 17 outflows, versus Lipper, which, as noted, has seen 16 cash gains and 19 cash losses.

IG corporates continue gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 37th consecutive gain overall and their 35th straight net inflow this year, with no net outflows yet recorded for 2017.

The Lipper data indicated that the funds saw an inflow of $743 million during the reporting week ended Wednesday.

The week before, ended Aug. 23, had seen a $3.39 billion cash injection.

The latest inflow brought the year-to-date surge so far up to an estimated $87.31 billion this week – the peak 2017 cumulative inflow level so far, versus the $86.57 billion seen last week, the previous high point for the year.

© 2015 Prospect News.
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