Reuters: US Dollar Report: SPDR Gold fund leads ETF inflows-Lipper

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SPDR Gold fund leads ETF inflows-Lipper Aug 24th 2012, 00:37 Thu Aug 23, 2012 8:37pm EDT By Daniel Bases NEW YORK, Aug 23 (Reuters) - Retail investors took a dim view of U.S. domiciled equity funds during the week ended Aug. 22 while gold's luster increased on expectations of more inflation, data from Thomson Reuters Lipper service showed on Thursday. Equity funds pulled in a net $2 billion overall for the week, but excluding exchange traded funds thought to represent institutional investor behavior, stock funds had net sales of $1.52 billion. "I think it represents a lack of faith in equity markets. We saw some selling pressure really build in the spring and ever since no one has been able to get behind a rally," said Jeff Tjornehoj, head of Americas Research at Lipper. Among ETFs, the State Street SPDR Gold Fund garnered the most new investment with $1.26 billion in net inflows during the week. In the ex-ETF equity fund sector, investors have pulled cash out in four of the last five weeks. In the course of the reporting week, the U.S. benchmark Standard & Poor's 500 stock index rose 0.57 percent. The index is hovering just below four-year highs with the prospect of more monetary stimulus from the U.S. Federal Reserve on the horizon potentially fuelling more gains. The Lipper data captures the latest read on stimulus from the Fed's meeting minutes of July 31-Aug. 1. The report, out on Wednesday, said there is a willingness to deliver more monetary stimulus "fairly soon" unless the economy improves considerably. The expectation for more stimulus, also referred to as quantitative easing, would likely take the form of a third round of bond buying by the central bank. This essentially means printing more dollars, diluting the currency's value and priming the pump for future inflation. Investors bought SPDR Gold Fund shares ahead of the Fed minutes to capitalize on inflation pressures that could be expected to boost gold, which is priced in dollars. The net inflow for this ETF is the 11th largest in its history and the best intake since late November of last year. Spot gold prices are trading at their best levels in five months, hovering around $1,670 an ounce. The surge in the Gold Fund's inflows contrasts with the steady inflow of money garnered by fixed income funds, which suffer when inflation rises. However, wariness of equities by the broader investing public and a weak global economy continue to support bonds. The taxable fixed income fund sector pulled in a net $3.7 billion, up slightly from the prior week while marking their seventh consecutive week of inflows. According to Tjornehoj, taxable bond funds year-to-date have attracted a net $162 billion. If this were the end of the year it would represent the third best on record behind 2009's $325 billion and 2010's $217 billion worth of net inflows. "I think we'll beat the $217 billion as there is just so much momentum behind bond fund investing. Even when equity markets are performing well investors lack the conviction to follow through with their wallets. It comes down to baby boomers remaining wary of equities following recent setbacks," Tjornehoj said. The hunt for yield pushed municipal bond fund assets to record highs in the last week. After attracting a net $435 million for the week, the total assets under management in the sector hit $573.6 billion, when including funds that report on both a weekly and monthly basis. "A lot of it is the continuous search for yield as they are higher in after-tax terms than plain-vanilla taxable bonds," Tjornehoj said, adding that despite ominous headlines regarding municipal bankruptcies, default rates still remain low. 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 2.005 0.07 2,827.122 10,199 Domestic Equities 2.339 0.11 2,149.662 7,591 Non-Domestic Equities -0.335 -0.05 677.460 2,608 All Taxable Bond Funds 3.743 0.26 1,476.669 4,715 All Money Market Funds 1.892 0.08 2,298.708 1,422 All Municipal Bond Funds 0.436 0.14 309.982 1,353 Link this Share this Digg this Email Reprints

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