Junk funds lose $450 million in week, first outflow after four gains

By Paul Deckelman

New York, Oct. 19 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned negative this week, according to numbers released on Thursday, their first such setback after four consecutive weekly gains.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $450 million more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Oct. 18.

That outflow follows the $967 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 Oct. 11.

And before that had come three other inflows – $646 million during the week ended Oct. 4, $433 million for the week ended Sept. 27, and $886 million in the week ended Sept. 20.

Those four inflows, totaling $2.91 billion, had followed a $96 million net outflow during the week ended Sept. 13 – the most recent previous downturn before this week.

Year-to-date outflow widens

According to a Prospect News analysis of the data, this week’s outflow was the 21st so far this year, versus 21 inflows during that time.

It was the fifth cash loss in the last 10 weeks, dating back to the week ended Aug. 16, versus five cash gains during that time.

Besides this week’s outflow, the aforementioned four straight inflows and the outflow in the Sept. 13 week, there was also a $641 million inflow during the week ended Sept. 6 and before that, three straight weekly outflows totaling $3.47 billion – a cash 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 Aug. 16 week.

This week’s outflow widened the estimated year-to-date net outflow number to $7.11 billion from last week’s $6.66 billion.

However, those cumulative outflow totals remain below the $9.82 billion of red ink seen during the Aug. 30 week, the widest year-to-date net outflow figure.

That Aug. 30 week’s year-to-date figure also represented the biggest cumulative net outflow number the junk funds had seen in recent memory, surpassing the $9.75 billion year-to-date deficit recorded the week ended Aug. 6, 2014, the previous wide mark.

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 ‘tiny’ inflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw what a market source described as a ‘tiny’ net inflow for this reporting week.

Small as it was, this week’s inflow was the fifth straight cash gain recorded by EPFR.

Last week, the source said, EPFR’s reported inflow came in just north of $800 million.

Before that, it had seen inflows of $1.22 billion in the Oct. 4 week, of $1.38 billion in the Sept. 27 week, and $243 million in the Sept. 20 week.

EPFR last saw an outflow during the Sept. 13 week, when it said the funds it tracks lost $711 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, they may differ widely.

And occasionally, the two companies’ numbers may even diverge completely, as happened this week, with EPFR recording a small inflow and Lipper seeing an outflow, as noted.

Taking those differences into account, EPFR has now seen 24 inflows so far this year and 18 outflows, versus Lipper, which, as noted, has seen 21 cash gains and 21 cash losses.

IG corporate rebound goes on

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their fifth consecutive weekly gain following a rare two straight weekly losses.

The Lipper calculations indicated that the funds saw a net inflow of $3.39 billion during the reporting week ended Wednesday, on the heels of a $2.42 billion upturn seen last week.

The inflows seen over the past five weeks had followed net outflows of $25 million during week ended Sept. 13 and $43 million during the week ended Sept. 6, which had been the first loss of the year after 35 straight net inflows this year before that and 37 inflows overall dating back to the week ended Dec. 21, 2016, according to a Prospect News analysis of the data.

This week’s inflow raised the year-to-date net inflow figure to $100.86 billion from last week’s $97.47 billion, establishing a fifth consecutive new 2017 cumulative peak level.

© 2015 Prospect News.
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