By Sam Forgione
NEW YORK, Nov 7 (Reuters) - Investors in funds based in the
United States pulled $2 billion out of stock funds in the latest
week, driven by uncertainty over the Federal Reserve's next
move, data from Thomson Reuters' Lipper service showed on
The outflows in the week ended Nov. 6 reversed high demand
over the prior three weeks. In the prior week, stock funds had
inflows of $11.8 billion.
"The odds have increased that the Fed might take some action
in December," said Barry Fennell, senior research analyst at
Lipper. "That specter is there."
Strong U.S. data on manufacturing and Midwest business
activity stoked fears that the Fed could begin scaling back its
$85 billion in monthly bond-buying at its December meeting
rather than in early 2014.
Outflows of $5.8 billion from funds that hold U.S. stocks
accounted for the overall outflows from stock funds. The
withdrawals came from U.S. exchange-traded funds, from which
investors pulled $6.5 billion.
The SPDR S&P 500 ETF Trust had outflows of $4.6
billion, marking the biggest outflows from a single fund over
the period even as the Standard & Poor's 500 rose a
modest 0.41 percent.
The iShares: Russell 2000 ETF, which holds
smaller-capitalized U.S. stocks, had the second-largest outflows
of $2.5 billion. ETFs are generally believed to represent the
investment behavior of institutional investors.
Mutual funds, which are thought to represent the retail
investor, were immune to the exodus from stocks in the latest
week and stock mutual funds attracted over $3 billion, marking
their fourth straight week of new cash.
Fennell said that mom-and-pop investors continue to jump
into the rally in U.S. stocks that has led to record gains and a
24 percent rise in the S&P 500 this year, while institutional
investors are taking profits.
Despite the outflows from U.S. stock funds, which led to net
outflows from stock funds overall during the week, international
stock funds attracted $3.5 billion, marking their ninth straight
week of new demand.
European stock funds reaped $417 million despite uncertainty
over which policy move the European Central Bank would take at a
Thursday meeting. The ECB cut interest rates to a record low on
Thursday to prevent the euro zone's recovery from stalling
The inflows into international stock funds came even as
MSCI's world equity index fell 0.5 percent over
the weekly reporting period on uncertainty over the ECB's rate
Japanese stock funds attracted $81.5 million, reversing
outflows of $59.8 million the prior week. Fennell said that cash
has been redeployed to Asia after fears surrounding Chinese
economic growth have not been realized.
Money market funds attracted $5 billion, marking the third
straight week of new cash into the funds. The funds typically
invest in low-risk securities such as short-dated government
bonds and are viewed as a safe place to park cash.
"There's a fair amount of investors out there who are
getting more cautious and taking some profits off the table,"
said Fennell. The inflows have come after investors pulled
$43.1 billion out of the funds in mid-October on fears that the
U.S. might default on its debt.
Commodities and precious metals funds had outflows of $181
million, marking a sixth straight week of withdrawals. Spot gold
slumped 1.4 percent on Oct. 31, the most in three weeks
on concerns surrounding the Fed's path.
Taxable bond funds attracted $937.4 million over the weekly
period, in a third straight week of new demand on investors'
risk aversion, Fennell said.
Outflows of $879.4 million from riskier high-yield junk bond
funds - the first since early September- also showed investors'
unwillingness to take risk.
The preference for safety showed in inflows of $23.6 million
into funds that mainly hold U.S. Treasuries. While meager, the
inflows broke a seven-week streak of outflows from the funds.
The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.
The following is a broad breakdown of the flows for the
week, including exchange-traded funds (in $ billions):
Sector Flow Chg % Assets Count
($Bil) Assets ($Bil)
All Equity Funds -1.955 -0.05 3,721.664 10,328
Domestic Equities -5.789 -0.21 2,765.441 7,616
Non-Domestic Equities 3.835 0.40 956.223 2,712
All Taxable Bond Funds 0.937 0.06 1,620.564 5,149
All Money Market Funds 5.046 0.21 2,376.897 1,285
All Municipal Bond -0.738 -0.26 280.164 1,389