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Investors shy away from U.S. stock mutual funds for second week: ICI

Published 03/30/2016, 04:41 PM
Updated 03/30/2016, 04:50 PM
© Reuters.  Investors shy away from U.S. stock mutual funds for second week: ICI

By Trevor Hunnicutt

NEW YORK (Reuters) - Stock mutual funds based in the United States posted $2.1 billion in withdrawals last week for the second consecutive week, Investment Company Institute (ICI) data showed on Wednesday, as U.S. equities broke a five-week winning streak.

The stock funds posted outflows after attacks in Belgium weighed on investor sentiment. Returns were also held back by a stronger U.S. dollar and comments by U.S. Federal Reserve policymakers suggesting the potential for an April hike in benchmark interest rates.

U.S.-based mutual funds that invest mainly in companies based within the country posted $2 billion in outflows in the week that ended March 23.

Outflows from international stock funds moderated to $108 million in the latest week, compared with $558 million the previous week, as investors took less money from emerging-markets funds. U.S.-based funds invested in those riskier markets posted just $79 million in outflows during the week, compared with $1 billion the previous week.

Investors ended an 11-week streak of inflows that had brought a total $22 billion to funds invested in developed markets outside the United States, like Europe and Japan, during the week. Those funds posted $29 million in outflows, according to ICI.

"Investors continued to favor bonds funds over equity funds, with municipal bonds and investment-grade taxable bonds dominating," said Todd Rosenbluth, who directs mutual-fund research at S&P Global Market Intelligence. "Within equities, the recent willingness to take on risk through small and mid-cap U.S. funds has disappeared, causing outflows."

Bond funds enjoyed another strong week, taking in $4.7 billion. Investment-grade bond funds attracted $1.6 billion, while lower-grade high-yield funds took in $420 million, ICI said. Prices on corporate debt have improved in recent weeks as fears that some energy companies would default abated and oil prices improved.

Municipal-bond funds took in $1.6 billion, their 25th straight week of inflows. Investors added $683 million to taxable-government bond funds, the 15th straight week of net new cash for those safe-haven funds, according to ICI.

The following table shows estimated ICI flows for the past five weeks (all figures in millions of dollars):

3/23 3/16 3/9 3/2 2/24/2016

Total equity -2,144 -2,087 1,472 45 4,441

-Domestic -2,035 -1,528 -240 -2,189 2,090

-World -108 -558 1,712 2,234 2,350

Hybrid 1,774 225 1,406 987 1,601

Total bond 4,673 4,921 5,939 4,100 -99

-Taxable 3,087 3,858 4,906 3,166 -1,120

-Municipal 1,586 1,063 1,032 934 1,020

Total 4,303 3,060 8,816 5,132 5,942

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