Junk funds back to outflows, lose $96 million in week; IG off again

By Paul Deckelman

New York, Sept. 14 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – were on the downside this week, according to numbers released on Thursday, thus failing to maintain the momentum established last week when they had improved after three consecutive weeks of losses before that.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $96 million more left those weekly reporting-only domestic funds than came into them during the week ended Wednesday, Sept. 13.

That outflow follows the $641 million inflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Sept. 6.

Last week’s inflow had followed three straight weekly outflows totaling $3.47 billion – a loss of $277 million for the week ended Aug. 30 plus two more sizable outflows before that: $1.01 billion during the week ended Aug. 23 and $2.19 billion during the week ended Aug. 16.

Those three net outflows had in turn followed – and completely dwarfed – two inflows totaling $319 million seen in the two weeks before that: a $124 million 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 20th so far this year, versus 17 inflows.

It was the sixth cash loss in the last 10 weeks, dating back to the week ended July 12, versus four gains seen during that time.

Besides this week’s outflow and the aforementioned inflows and outflows recorded during August and earlier in September, that 10-week stretch also includes a $21 million outflow seen 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.

This week’s outflow widened the year-to-date net outflow number to $9.28 billion from last week’s $9.18 billion.

Those cumulative outflow totals remain below the $9.82 billion of red ink seen during the Aug. 30 week, which had established a second consecutive new year-to-date widest net outflow figure, eclipsing the previous 2017 net outflow wide point of $9.55 billion set the week before last.

EPFR sees sizable outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw an outflow for this reporting week that a market source estimated at more than $700 million.

Last week, the source said, EPFR’s reported inflow was “a little bit higher”: than the corresponding AMG/Lipper inflow figure – the second successive weekly inflow reported by EPFR, which had also seen a cash addition during the week ended Aug. 30 that the market source estimated was “a little bit over $400 million.”

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. Sometimes their numbers track fairly closely, as happened to be the case last week, while other times – such as this week – they may differ widely.

And occasionally, the two companies’ numbers may even diverge completely, as happened during the Aug. 30 week, when EPFR reported an inflow and Lipper saw an outflow, as noted.

Taking those differences into account, EPFR has now seen 19 inflows so far this year and 18 outflows, versus Lipper, which, as noted, has seen 17 cash gains and 20 cash losses.

IG corporates stay in a rut

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their second consecutive loss this week, coming after 35 straight inflows so far this year and 37 inflows overall, according to a Prospect News analysis of the data.

The Lipper calculations indicated that the funds saw a net outflow of $25 million during the reporting week ended Wednesday, on the heels of a $43 million downturn seen last week.

Those outflows, however modest, stood in contrast to the $743 million inflow during the week ended Aug. 30, the most recent cash addition.

Last week’s outflow had been the first weekly drain from those funds since the $81 million cash loss seen during the week ended Dec. 14, 2016.

This week’s outflow slightly reduced the year-to-date net inflow figure to $87.24 billion from last week’s $87.27 billion, which, in turn was down from the $87.31 billion seen during the Aug. 30 week, the 2017 cumulative peak level seen so far.

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