Reuters: US Dollar Report: Investors flee US stock ETFs and stick with bonds -Lipper

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Investors flee US stock ETFs and stick with bonds -Lipper Oct 26th 2012, 02:03 Thu Oct 25, 2012 10:03pm EDT By Sam Forgione NEW YORK, Oct 25 (Reuters) - U.S.-based stock funds had their worst week since early September and lost $4.74 billion as stock markets took a nosedive while inflows into bond funds were largely unchanged, data from Thomson Reuters' Lipper service showed on Thursday. The outflows from stock funds in the week ended Oct. 24 were almost entirely a result of investors fleeing exchange-traded funds, which surrendered $4.53 billion after outflows of $2.75 billion the previous week. Taxable bond funds had net inflows of $4.43 billion, just slightly lower than inflows of $4.46 billion the previous week as investors continued to seek investment-grade corporate bond funds and government-backed mortgage bond funds. The State Street SPDR S&P 500 ETF again accounted for much of the net outflows from stock funds and gave up $5.53 billion in investor money. Actively managed stock funds saw more money redeemed with investors pulling $200.6 million. In the prior week, such funds broke a nine-week downward trend by taking in new money from investors. ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor. "There's been a general consensus that the earnings season coming out wasn't going to be as robust as previous quarters," said Matthew Lemieux, analyst at Lipper. "Institutional investors probably saw on the horizon that there would be some weakness," Lemieux added, with regard to the ETF outflows. The benchmark S&P 500 fell 3.57 percent over the reporting period as earnings from companies such as Google Inc , General Electric Co and McDonald's Corp disappointed and negative economic data emerged out of France, Spain and Germany. A bright spot for stock funds was the iShares MSCI Emerging Markets Index Fund, which pulled in $1.22 billion in new money. "That really is one of the only games in town if you're trying to get exposure to future growth," said Lemieux on the emerging markets index. Investors also put $1.25 billion into flexible funds, which can invest in a wide range of assets including both stocks and bonds. The inflows were the most in 11 weeks. Lemieux said that investors could be seeking managers with a more diversified strategy, while inflows into a series of target-date funds from Wells Fargo suggested that institutional investors may have newly offered the funds for employee 401(k) plans. Bond funds again won investors' favor with net inflows of $4.43 billion, slightly lower than inflows of $4.46 billion the previous week. Bond mutual funds accounted for $3.65 billion of the new money. Investment-grade corporate bond funds attracted $1.9 billion in inflows, lower than inflows of $2.4 billion the previous week but still high. Investors also continued to target government-guaranteed mortgage bonds and gave $770 million to funds that hold them. The Federal Reserve announced on Wednesday that it has not changed its plan to buy $40 billion in the debt per month to keep interest rates low and spur a stronger economic recovery. Funds that hold safe-haven U.S. Treasuries fared poorly despite the bearish market sentiment with outflows of $452.52 million, reversing inflows of $265.2 million the previous week. Investors may be "feeling that they need to get more bang for their buck," said Lemieux on the outflows from Treasury funds, given their low yields. 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 Assets Count ($Bil) ($Bil) All Equity -4.736 -0.16 2,833.926 10,058 Funds Domestic -8.333 -0.38 2,133.499 7,451 Equities Non-Domestic 3.597 0.50 700.427 2,607 Equities All Taxable 4.432 0.30 1,484.510 4,633 Bond Funds All Money -3.215 -0.14 2,293.450 1,393 Market Funds All 0.666 0.21 316.299 1,338 Municipal Bond Funds Link this Share this Digg this Email Reprints

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