Junk funds gain $310 million, snapping four-week outflow streak

By Paul Deckelman

New York, Nov. 30 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – broke out of their month-long negative rut this week, according to the most recently released numbers.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $310 million more came into those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Nov. 29.

It was the first net inflow after four consecutive weeks of net outflows, including the $209 million cash loss reported by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Nov. 22.

Before that had come an enormous $4.44 billion cash loss during the week ended Nov. 15 – the second biggest outflow this year, according to a Prospect News analysis of the data, surpassed only by the $5.68 billion cash hemorrhage during the week ended March 15, and the fourth-biggest ever since AMG/Lipper began tracking the fund flows back in 1992.

Before that outsized outflow had come cash losses of $622 million during the week ended Nov. 8 and $1.2 billion during the week ended Nov. 1.

Those four outflows, totaling $6.47 billion, stood in stark contrast to the $123 million net inflow seen during the week ended Oct. 25, the most recent previous week in which the funds had showed a net gain.

Year-to-date outflow narrows

According to the Prospect News analysis, this week’s inflow was the 23rd so far this year, versus 25 outflows during that time.

It was the fifth cash gain in the last 10 weeks, dating back to the week ended Sept. 27, versus five cash losses during that time.

This week’s inflow cut the estimated year-to-date net outflow number to $13.15 billion from last week’s $13.46 billion, which had established a second consecutive new widest year-to-date net outflow figure.

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

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 outflows continuing

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw its fifth straight net outflow this week, with the amount of money leaving the junk funds rather than coming into them at about $535 million, according to a market source.

That followed the more than $2.2 billion outflow that the source had seen last week.

Before that had come a cash loss “in excess of $6 billion” during the Nov. 15 week, as well as outflows of $645 million during the Nov. 8 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 during the Nov. 8 and Nov. 15 weeks, while other times, they may differ widely, such as last week, when EPFR reported an outflow more than 10 times the size of the one seen by Lipper.

And occasionally, the two companies’ numbers may even diverge completely, as happened this week, with EPFR recording yet another outflow and Lipper seeing a modest inflow to break a losing streak, as noted.

Taking those differences into account, EPFR has now seen 25 inflows so far this year and 23 outflows, versus Lipper, which, as noted, has seen 23 cash gains and 25 cash losses.

IG corporates continue rebound

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 11th consecutive weekly gain following a rare two straight weekly losses.

The Lipper calculations indicated that the funds saw a net inflow of $1.16 billion during the reporting week ended Wednesday, on the heels of a $2.56 billion upturn seen last week.

The inflows seen over the past 11 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 $114.39 billion from last week’s $113.23 billion, establishing a 10th consecutive new 2017 cumulative peak level.

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