Stock, taxable bond funds gain, munis lose-Lipper

* Municipal bond funds record 11th week of outflows

* Equity fund inflows: $996 mln, ex-ETFs $3.34 bln

* Taxable bond inflows: $4.692 bln, best since July

By Daniel Bases

NEW YORK, Jan 27 (Reuters) - U.S. investors seeking higher returns plowed cash into riskier domestic equity and taxable fixed income mutual funds in the week ended Jan. 26, while municipal bond funds suffered an eleventh week of outflows, data from Lipper showed on Thursday.

Equity funds took in a net $996 million, marking the 15th week of a surplus of new money in the last 16 weeks. However, excluding outflows from exchange traded funds, the figure climbs to $3.34 billion.

"Ironically there was a huge outflow from the equity ETF sector. I do think that could be professional managers squaring positions and perhaps taking on a more active role with their investments," said Tom Roseen, senior analyst at Lipper, a Thomson Reuters service.

"I think with the Dow flirting again with 12,000, people appear more sanguine with the equity market. We could be seeing money coming off the sidelines as investors are afraid missing out on the current rally," he added.

Money market mutual funds had net outflows of $2.74 billion in the latest week. Investors typically use these funds to park their cash safely until they decide where to invest.

The Dow rose 1.35 percent in the latest reporting period and currently is at a 29-month high that is about 11 points shy of the 12,000 mark.

While most equity fund sectors took in new money in the latest week, gold and natural resources sector funds had net redemptions totaling $406 million. That was the fifth week of outflows in the past six.

Precious metals, in particular, have lost some of their luster as the prospect of rising economic growth and higher interest rates in Europe diminishes their safe-haven status. Indeed, spot gold prices fell 1.78 percent in the week XAU=.

Other weak equity sectors included small-cap growth funds, which had outflows of $1.03 billion, and international equity funds, with outflows of $1.21 billion. Energy stock funds had outflows of $180 million and financial/banking funds had $46 million in net redemptions.

Emerging market equity funds had net outflows of $1.459 billion, but this was due entirely to $1.92 billion in net redemptions from exchange traded funds.

"ETFs seems to be where the problems were this week," said Roseen.

MUNICIPAL STREAK

Municipal bonds suffered an eleventh week of net outflows, bringing the total amount of redemptions in the period to $22.5 billion. Anxiety over local U.S. government finances has led investors to pull their cash out of this sector even as bargain-hunting in the past week has boosted bond prices.

The municipal bond market, which offers investors a tax-free investment, is approximately $2.8 trillion.

Taxable bond funds took in the most fresh cash, $4.692 billion, since the week ended July 14. Investment grade bond funds took in $1.35 billion. This sector of the market has had only four weeks of net redemptions since December 2008.

Bank loan funds extended their inflow streak to 30 weeks, taking in a net $937 million. Investors have turned to this sector of the market in search of higher yields versus what they can earn on safer U.S. Treasuries.

The only outflows in the taxable fixed income sector were in mortgage-backed securities. The combined government Treasury and mortgage fund group had outflows of $190 million.

The more narrowly defined government mortgage funds that purchase debt from government-sponsored entities like Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) had outflows of $136 million.

The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.

Below is a broad breakdown of the flows for the week, including exchange-traded funds: Sector Flow Pct Total Share

Change Change Assets Class (in $ billions) In Assets Count ============================================================== All Equity Funds 0.996 0.04 2,655.407 9,660 -Domestic Equities 2.180 0.11 1,955.799 7,370 -Non-Domestic Equities -1.184 -0.17 699.608 2,290 All Taxable Bond Funds 4.693 0.39 1,218.318 3,873 All Money Market Funds -2.743 -0.11 2,533.756 1,540 All Municipal Bond Funds -1.901 -0.62 308.453 1,527 (Editing by Dan Grebler)