Reuters: US Dollar Report: US equity fund inflows slow; money fund exodus-Lipper

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US equity fund inflows slow; money fund exodus-Lipper Mar 22nd 2012, 21:59 Thu Mar 22, 2012 5:59pm EDT By Daniel Bases NEW YORK, March 22 (Reuters) - The flow of fresh capital into U.S. equity mutual funds slackened sharply in the week ended March 21 while big selling in money market funds indicates corporations were freeing up cash for tax bills, data from Thomson Reuters' Lipper showed on Thursday. In the reporting week, the U.S. benchmark Standard & Poor's 500 stock index rose 0.62 percent, having hit a four year high on March 19 before losing some ground. Overall, U.S. equity mutual funds had net inflows of just $282 million. Excluding exchange traded funds that figure rises to $729 million, indicating individuals were chasing the returns. Domestic equity funds, excluding ETF activity which is anecdotally viewed as representing institutional investment behavior, had net inflows of nearly $1 billion versus an outflow of $261 million for non-domestic equities. The inflows for domestic equities, ex-ETFs, was the best weekly performance since August 2011, indicating the retail investor was putting cash to work. "Some surveys are showing the retail side has bullish views running at high, and the concern I have is they are coming in at the top of the market," said Matthew Lemieux, analyst at Lipper. "The overall inflows for equities were pretty low, with the ETFs showing outflows and part of that appears to be quarter end profit-taking and perhaps some concerns about U.S. economic growth being thrown backward by high energy prices. The economic data out of Europe and China is not so comforting either," he said. Money market funds had outflows for a fourth consecutive week, with the $16.7 billion in net redemptions the largest since the week ended Jan. 25. "The vast majority of that was likely due to tax liabilities of corporations which use money market funds as cash management vehicles. There was no strong counter inflows elsewhere," Lemieux said. There was however the continued strength of taxable bond funds, which pulled in $3.1 billion, marking the 14th consecutive week of net new money. The breakdown was relatively even, with $1.3 billion moving into corporate investment grade and nearly $1 billion into corporate high yield funds. Hunting for yield continued in equity income funds as well, although the inflows were the lowest since the week ended Aug. 3, 2011, with just $153.7 million in fresh capital. This sector has been one of the hottest over the past two years as government interest rates have held near zero. Retirees especially have been forced to forage for yield outside of the traditional fixed income arena while corporations with fat balance sheets have been able to fund or raise dividends. Tax-free municipal bond funds pulled in fresh capital for a sixteenth consecutive week, albeit a paltry $88.5 million. That represented an 87 percent decline from the week before. 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 0.282 0.01 2,890.566 10,301 Domestic Equities 0.314 0.01 2,192.878 7,745 Non-Domestic Equities -0.032 -0.00 697.688 2,556 All Taxable Bond Funds 3.108 0.23 1,383.403 4,519 All Money Market Funds -16.715 -0.71 2,330.512 1,447 All Municipal Bond Funds 0.088 0.03 287.179 1,375 Link this Share this Digg this Email Reprints

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