U.S. bond and stock funds gain demand amid election hype -Lipper
By Sam Forgione NEW YORK, Nov. 8 (Reuters) - U.S.-based investment-grade corporate bond funds attracted the most new money in a single week in nearly 21 years as the U.S. presidential election and Europe's troubles shook markets, data from Thomson Reuters' Lipper service showed on Thursday. The funds attracted $2.74 billion in new cash, a record high after slight inflows of $290.1 million the previous week. Investors gave just $81.6 million to riskier high-yield corporate bond funds. Bond exchange-traded funds and mutual funds combined took in $6.14 billion in inflows in the week ended November 7, the most new money for the funds since late January. Investors favored bond mutual funds, to which they gave $4.45 billion. ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor. Investors also opted for safety in U.S. Treasuries and gave $1.08 billion to funds that hold them, the most new money since early May. Stock funds still saw demand, however, and pulled in $4.92 billion in new money with $4 billion of the cash going into ETFs, the most in seven weeks. The benchmark S&P 500 fell 1.25 percent over the reporting period amid disappointing company revenue reports and renewed concerns about the "fiscal cliff" of spending cuts and tax increases after the reelection of U.S. President Barack Obama. The European Commission's statement that the euro zone would barely grow next year also dragged on stocks. Investor bets on a win for Republican challenger Mitt Romney and Democrat incumbent Obama led to the demand for both stock and bond funds, said Lemieux. Many investors believed a Romney win would boost stocks given his pro-business attitude while an Obama win would spur a bond rally given his plan to support the status quo of low-rate monetary policy. Much of the reporting period included the run-up to President Obama's reelection early Wednesday morning. At the close of Wednesday trading, the S&P 500 had fallen 2.37 percent with heavy declines in financial and energy shares. Mutual funds that hold foreign stocks had inflows of $1.56 billion, the most since mid-April, while mutual funds that hold U.S. stocks had outflows of $640 million. Retail investors favored emerging market stock funds, said Lemieux, which they think offer the best growth potential. Money-market funds had inflows of $31.07 billion, the most since August of last year and reversing large outflows $23.5 billion the previous week. Institutional investors may have decided to reinvest in the funds after taking money out during the two-day market disruption from Superstorm Sandy, Lemieux said. 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 ($Bil) Count ($Bil) Assets All Equity Funds 4.916 0.17 2,820.721 9,943 Domestic Equities 2.621 0.12 2,119.442 7,364 Non-Domestic 2.294 0.33 701.279 2,579 Equities All Taxable Bond 6.139 0.41 1,490.841 4,600 Funds All Money Market 31.071 1.37 2,300.564 1,391 Funds All Municipal Bond 0.866 0.27 318.636 1,339 Funds
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