U.S.-based stock funds have $2 bln outflow -Lipper

Reuters

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

Thursday.

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

move.

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

Funds

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