Junk funds lose $335 million in week, sixth straight 2018 outflow

By Paul Deckelman

New York, Feb. 22 – High-yield mutual funds and exchange-traded funds – considered a reliable barometer of overall junk market liquidity trends – remained in negative territory for a sixth straight week after two weeks on the plus side to begin the year, according to numbers released on Thursday.

Sources familiar with the fund-flow statistics generated by AMG Data Services Inc. said that $335 million more left those weekly reporting-only domestic funds in the form of investor redemptions than came into them during the week ended Wednesday, Feb. 21.

However, that was a considerably smaller shortfall than the yawning $6.31 billion cash bleed reported last Thursday by the Arcata, Calif.-based unit of Thomson Reuters Corp’ s Lipper analytics division for the seven-day period ended Feb. 14.

According to a Prospect News analysis of the data, last week’s net outflow was not only by far the biggest cash drain seen so far this year, more than double the $3.08 billion recorded during the week ended Jan. 17, the first outflow of the year – it was also the second-largest outflow on record since Lipper began tracking fund flows back in 1992, exceeded only by the record $7.07 billion that the funds lost during the week ended Aug. 6, 2014.

A string of outflows

Last week’s giant-sized cash hemorrhage had followed the $2.74 billion outflow reported for the seven-day period ended Feb. 7.

And before that came outflows of $1.75 billion during the week ended Jan. 31, $1.13 billion during the week ended Jan. 24 and a $3.08 billion cash drain during the Jan. 17 week, which, as noted, had been the first outflow of the year, after two consecutive net inflows.

The six outflows, totaling $15.34 billion, followed two 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 the Prospect News analysis, that latter inflow was 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.

Recent trend is negative

According to the Prospect News analysis, this week’s outflow was the eighth cash loss in the last 10 weeks, dating back to the week ended Dec. 20, versus just two cash gains during that time – the ones which had started the year.

With eight 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 to a cumulative net deficit of $12.5 billion, its sixth successive peak loss for the year so far, versus the $12.16 billion cumulative outflow last week.

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 slide continuing

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

A market source said that this week’s outflow clocked in around $1.8 billion.

Sizable as that was, it was but a fraction of the more than $10 billion cash loss seen last week, which – like the AMG/Lipper outflow figure – had been the second-biggest that EPFR had ever recorded, exceeded only by the more than $11 billion of cash that was seen having fled the funds the agency was tracking during the week ended Aug. 6, 2014.

That was the same week the Lipper outflow number set a company record, as noted.

Last week’s huge outflow reported by EPFR easily surpassed the more than $5 billion cash loss seen during the Feb. 7 week and was several times the outflow of more than $2 billion posted during the Jan. 31 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 week ended Nov. 1, according to a Prospect News analysis of the data.

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. While their numbers track fairly closely, other times the numbers may vary widely, as happened this week, with only a relatively modest outflow seen by Lipper, but a sizable outflow reported by EPFR.

Occasionally, the two companies’ numbers may even diverge completely.

Taking those differences into account, EPFR is even with Lipper so far, each recording two inflows and six outflows.

IG corporates bounce back

Looking at fund flows for other asset classes during the week, investment-grade corporate funds saw a $1.57 billion net inflow figure.

That was a solid comeback from last week, when those high-grade funds had posted a rare $790 million net outflow – the first downturn after 21 straight weeks of gains dating back to mid-September, according to a Prospect News analysis of the data.

Those gains had included the $4.73 billion for the seven-day period ended Feb. 7 – the biggest improvement seen so far this year, eclipsing the previous mark of $4.19 billion recorded during the Jan. 10 week, and one of the largest weekly inflows ever recorded for those IG funds.

This week’s funds upturn raises the estimated year-to-date net inflow figure for the IG corporates to $19.66 billion from last week’s $18.09 billion total.

That also establishes a new peak cumulative inflow level for the year, topping the $18.88 billion during the Feb. 7 week, which had been the funds’ sixth straight new peak level for the year so far.

© 2015 Prospect News.
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