Junk funds start new year with $186 million gain, first inflow after three straight weekly outflows

By Paul Deckelman

New York, Jan. 4 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – turned over a new leaf this week, even as they turned the page on a new calendar year, moving to the plus side after having remained squarely in negative territory in the closing weeks of 2017, according to the numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that some $186 million more came into those weekly reporting-only domestic funds than left them in the form of investor redemptions during the week ended Jan. 3.

That net inflow was in sharp contrast to the three consecutive weeks of net outflows, totaling $2.27 billion, with which the funds had closed out 2017, including a $240 million cash loss reported by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Dec. 27.

That outflow, in turn, had followed cash drains of $1.11 billion during the week ended Dec. 20 and $922 million during the week ended Dec. 13.

Recent trend is negative

According to a Prospect News analysis of the data, this week’s inflow was only the third such cash gain seen in the last 10 weeks, dating back to the week ended Nov. 1, versus seven cash losses seen during that time.

Besides the latest week’s inflow and the aforementioned three straight weeks of outflows before that, the 10-week stretch includes a pair of inflows totaling $527 million – a $217 million cash improvement during the week ended Dec. 6. and a $310 million inflow for the week ended Nov. 29.

Before that came four consecutive weeks of outflows totaling $6.47 billion.

That losing streak included outflows of $209 million during the week ended Nov. 22 and an enormous $4.44 billion cash loss during the week ended Nov. 15 – the second-biggest outflow seen last year, according to the Prospect News analysis, surpassed only by the $5.68 billion cash hemorrhage seen during the week ended March 15. The Nov. 15 outflow was also the fourth-biggest plunge ever recorded since AMG/Lipper began tracking fund flows back in 1992.

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

Funds plunged in 2017

While the modest inflow seen this week starts the 2018 year-to-date tally off on a positive note, 2017 was anything but that.

According to the Prospect News analysis, 2017 saw 28 weeks of outflows versus 24 weeks of inflows – but the cumulative fund-flow figure was considerably more lopsided, with an estimated final net outflow number for the year of some $15.21 billion, more than reversing the estimated total net inflow of $11.12 billion which had been recorded in 2016.

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

Last year’s huge cash plunge was the first full-year outflow seen since the $7.05 billion cash loss posted in 2015 and, counting the $6.27 billion cumulative net outflow the funds saw in 2014, was the third yearly outflow the funds had seen in the last four years, according to the analysis.

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.

IG corporates extend gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their 16th consecutive weekly gain following a rare two straight weekly losses, according to a Prospect News analysis of the data.

The Lipper calculations indicated that the funds saw a net inflow of $965 million during the reporting week ended Wednesday, on the heels of a $439 million upturn seen last week.

The inflows seen over the past 16 weeks followed net outflows of $25 million recorded 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 weekly net inflows last year before that and 37 weekly inflows overall dating back to the week ended Dec. 21, 2016 according to the Prospect News analysis.

This week’s inflow establishes a year-to-date net inflow figure of $965 million.

Last year ended with an estimated $117.35 billion net inflow total for the year, the 14th consecutive new 2017 cumulative peak level, the analysis indicated.

© 2015 Prospect News.
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