First-half mutual fund inflows still eclipse recent string of nine outflows, Deutsche says

By Paul A. Harris

St. Louis, Mo., Aug. 12 - The succession of inflows to high-yield mutual funds during the first half of 2002 is still eclipsing the present string of outflows even though those withdrawals have now extended to nine successive weeks, according to Deutsche Bank Securities, Inc. high yield analyst Hunkar Ozyasar.

According to Ozyasar, the present string of week-only outflows reported by AMG Data Services began on June 13 and has continued up through the most recent data, which was for the week ending Aug. 7. The mean of those outflows, Ozyasar says, is $219 million.

That is substantially less than half the value of the mean of the 11 straight inflows reported during the first half of 2002 between Feb. 22 and May 2 which averaged $455 million.

Deutsche's co-head of high-yield research Andrew W. Van Houten told Prospect News on Monday that although high-yield fund flows show no specific signs of turning around in the near term there is evidence that volume of cash flowing out of high-yield is tapering off.

"Our view is that certainly with the amount of market volatility that we've seen and the fact that high yield returns have been hit by this market volatility, we wouldn't be surprised to see these outflows continue," said Van Houten.

"But if you take a look at the outflow last week, it's small. So over the past several weeks the size of the outflows has begun to diminish."

According to Deutsche Bank's High Yield Weekly report published on Aug. 9, AMG reported an outflow of $51 million from high-yield mutual funds for the week ending Aug. 7 - "the smallest outflow we have seen over the last nine weeks," the report stated.

According to the report, the high yield market posted returns of negative 1.14% for the week ending Aug. 8. "In a rare move, all 13 major sectors posted negative returns with the Telecom segment falling 2.45%," the report stated, adding that health care was the best performer at -0.22%

Citing the outflows and the negative returns, the report goes on to state that "few participants will find it surprising that both issuance and the forward calendar have taken a beating."

Year-to-date new issuance stands at close to $43 billion compared to $82.5 billion for 2001, according to Deutsche Bank, which adds that "given that there are less than five months left in 2002 and the decline in the number of scheduled deals we will probably not match the new issue volume of 2001, which was low by historic standards."

"There is likely to be a busier calendar after Labor Day, because there are deals in the pipeline," Van Houten noted during a Monday conversation with Prospect News.

He added he believes this to be true not only of his institution but of "the entire underwriting market."

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