Junk funds see $1.13 billion weekly loss, second straight outflow

By Paul Deckelman

New York, Jan. 25 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a second straight week, after two weeks in a row before that on the plus side, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $1.13 billion more left those weekly-reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Jan. 24.

That net outflow followed the $3.08 billion cash loss reported by the Arcata, Calif.-based unit of Thomson Reuters Corp.’s Lipper analytics division for the seven-day period ended Jan. 17 – which had been the first outflow of the year after two consecutive net inflows and was the biggest cash exit those funds had seen since the $4.44 billion cash plunge recorded in the week ended Nov. 15, 2017.

The two outflows, totaling $4.21 billion, follow two successive inflows amounting to $2.84 billion: $186 million in the week ended Jan. 3 and $2.651 billion for the week ended Jan. 10.

According to a Prospect News analysis of the data, that latter inflow had been the largest cash infusion the junk funds had seen since the week ended Dec. 14, 2016, when $3.75 billion more came into the funds than left them.

It topped the largest inflow seen in all of 2017 – the nearly $2.38 billion cash gain recorded in the week ended last April 5.

This year’s two inflows directly followed three straight outflows adding up to $2.27 billion with which the funds had closed out 2017 – a $240 million cash loss for the week ended Dec. 27 and before that, 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 the Prospect News analysis, this week’s outflow was the sixth cash loss in the last 10 weeks, dating back to the Nov. 22 week, versus four cash gains during that time.

Besides the outflows seen over the past two weeks, the twin inflows from the previous two weeks and the aforementioned three straight weeks of outflows before that, the 10-week stretch also 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.

And before that came a $209 million outflow during the week ended Nov. 22.

That smallish cash loss, in turn, was part of a four-week streak of outflows totaling $6.47 billion, which also included a $1.2 billion downturn during the week ended Nov. 1, a $622 million outflow for the week ended Nov. 8, and the $4.44 billion cash nosedive recorded in the Nov. 15 week, all three of which fall outside of the specified last-10-week time period.

The latter outflow was the second-biggest cash drain seen last year, according to the Prospect News analysis, surpassed only by the $5.68 billion hemorrhage seen during the week ended March 15. It was also the fourth-biggest cash exit ever recorded since AMG/Lipper began tracking fund flows back in 1992.

Year-to-date loss deepens

With four reporting weeks in the books for 2018 so far, this week’s outflow pushed the year-to-date funds flow number deeper into the red – a net deficit of $1.37 billion. It was the second successive peak loss for the year so far, versus the $239 million cumulative outflow seen last week.

That in turn had followed the estimated $2.84 billion year-to-date inflow total seen during the Jan. 10 week, the funds’ second peak cumulative inflow level for the year so far.

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

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 remains negative

Another fund-tracking service, Cambridge, Mass.-based EPFR Global, meanwhile saw its second consecutive net outflow for the year this week, after having opened the new year with two straight weeks of net inflows.

A market source said that EPFR’s outflow was “roughly double” the outflow reported by AMG/Lipper.

He said that last week’s outflow had totaled “about half a billion dollars less” than the Lipper figure.

The source also said that the amount of money that came into the junk funds EPFR follows during the Jan. 10 week rather than leaving them was “a little over half” of the Lipper number.

And that followed an $860 million cash infusion seen during the Jan. 3 week.

The two straight weeks of inflows that had opened 2018 followed outflows seen over the last nine straight weeks of 2017 dating back to the Nov. 1 week, according to a Prospect News analysis of the data, including the downturn seen in the final week of 2017, which the market source said was roughly double the $240 million outflow reported for that week by AMG/Lipper.

The market source said that the U.S. funds and the non-U.S. funds respectively each accounted for roughly half of last week’s overall outflows.

In contrast, the source said that most of money that came into the funds during the Jan. 10 week had moved into U.S.-domiciled funds.

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 – but not always – point pretty much in the same general direction in terms of a given week having an inflow or an outflow, according to the Prospect News analysis of the data.

Taking those differences into account, EPFR – which this year is even with Lipper so far, each recording two inflows and two outflows – saw 25 inflows last year versus 27 outflows, while Lipper had 24 cash gains and 28 cash losses in the year’s 52 weeks.

IG corporates extend gains

Looking at fund flows for other asset classes during the week, investment-grade corporate funds posted their fourth straight gain for this year so far this week and their 19h consecutive weekly gain following a rare two straight weekly losses back in September, according to a Prospect News analysis of the data.

The Lipper calculations indicated that the funds saw a net inflow of about $3.48 billion during the reporting week ended Wednesday, versus last week’s $3.92 billion cash gain.

And that advance had been not too far down from the Jan. 10 week’s reported upturn of almost $4.19 billion – the biggest of the year so far and one of the largest weekly inflows ever recorded for the IG funds.

The year had started off with a $965 million advance.

This week’s inflow establishes a year-to-date net inflow figure of $12.55 billion, a third consecutive new peak for the year so far, up from last week’s $9.07 billion.

Last year ended with a $117.35 billion net inflow total for the year, the analysis indicated.

© 2015 Prospect News.
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