Junk funds plunge by $4.44 billion this week, fourth-biggest outflow

By Paul Deckelman

New York, Nov. 16 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – moved sharply deeper into negative territory this week, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $4.44 billion more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Nov. 15.

It was the third consecutive weekly net outflow number, following the $622 million outflow reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Nov. 8.

The week before that, ended Nov. 1, had seen a $1.2 billion net cash loss from the funds.

Those three outflows, totaling $6.26 billion, stood in stark contrast to the $123 million net inflow seen during the week ended Oct. 25, the most recent week in which the funds showed a net gain.

According to a Prospect News analysis of the data, this week’s outflow was the fourth-biggest since AMG/Lipper began tracking the fund flows back in 1992.

It was surpassed only by outflows of $4.63 billion during the week ended June 5, 2013, $5.68 billion during the week ended March 15 of this year – the second-biggest outflow ever and largest so far of 2017 – and the biggest cash hemorrhage on record, nearly $7.07 billion during the week ended Aug. 6, 2014.

Year-to-date outflow widens

According to the Prospect News analysis, this week’s outflow was the 24th so far this year, versus 22 inflows during that time.

It was the fifth cash loss in the last 10 weeks, dating back to the week ended Sept. 13, versus five gains during that time.

This week’s outflow raised the estimated year-to-date net outflow number to $13.25 billion from last week’s $8.81 billion.

That established a new widest year-to-date net outflow figure, easily surpassing the $9.82 billion of red ink seen during the week ended Aug. 30, the previous 2017 wide point.

Before their headlong plunge into negative territory seen for most of this year, the flows had shown a relatively strong start to 2017.

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 posts giant outflow

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw its third straight net outflow this week, with the amount of money leaving the junk funds rather than coming into them “in excess of $6 billion,” according to a market source.

That followed cash losses of $645 million last week and $345 million during the Nov. 1 week, the source said.

Before that, EPFR had recorded six consecutive weeks of net inflows, most recently the $170 million cash gain seen in the Oct. 25 week and what the source called a “tiny” inflow observed during the Oct. 18 week.

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 this week and last week, while other times they may differ widely, such as two weeks ago, when Lipper reported an outflow more than triple the size of the one seen by EPFR.

And occasionally, the two companies’ numbers may even diverge completely, as happened during the October 18 week, with EPFR recording a small inflow and Lipper seeing a modest outflow, as noted.

Taking those differences into account, EPFR has now seen 25 inflows so far this year and 21 outflows, versus Lipper, which, as noted, has seen 22 cash gains and 24 cash losses.

IG corporates gain more

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

The Lipper calculations indicated that the funds saw a net inflow of $2.41 billion during the reporting week ended Wednesday, on the heels of a $1.29 billion upturn seen last week.

The inflows seen over the past nine weeks have 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 $110.67 billion from last week’s $108.26 billion, establishing an eighth consecutive new 2017 cumulative peak level.

© 2015 Prospect News.
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