Demand for U.S. stock and bond funds falters -Lipper

Thu Nov 15, 2012 9:56pm EST

By Sam Forgione
    NEW YORK, Nov 15 (Reuters) - U.S.-based stock and bond funds
saw a dramatic pullback in the latest week as worries over the
"fiscal cliff," a combination of tax hikes and spending cuts in
the U.S., eroded sentiment, data from Thomson Reuters' Lipper
service showed on Thursday. 
    Stock mutual funds and exchange-traded funds combined had
outflows of $3.25 billion in the week ended Nov. 14, a major
pullback from inflows of $4.92 billion the previous week. 
    Bond funds showed similar weakness as both mutual funds and
exchange-traded funds combined had just $287.3 million in
inflows after huge inflows of $6.14 billion the prior week. 
    The S&P 500 fell 2.8 percent over the reporting
period as worries surrounding the "fiscal cliff" of automatic
tax increases and spending cuts set to occur at the start of
next year weighed on investor confidence.
    The anticipation of higher taxes on capital gains and
dividends also led investors to sell stocks.
    With regard to stock funds, investors took $1.6 billion out
of stock mutual funds and $1.66 billion out of exchange-traded
funds. Funds that hold U.S. stocks had outflows of $4.8 billion,
while funds that hold foreign stocks were a bright spot with
inflows of $1.54 billion. 
    ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
    The outflows from stock exchange-traded funds follow inflows
of $4 billion the previous week, which was the most in seven
weeks. Investors took $3.04 billion out of the SPDR S&P 500 ETF
fund, which tracks the benchmark S&P 500 stock index.
    Bond exchange-traded funds had outflows of $789 million,
reversing inflows of $1.7 billion the previous week and the most
taken out of the funds since early September. Bond mutual funds
offset some of the weakness, with inflows of $1.08 billion. 
    Investors continued to favor investment-grade corporate
bonds and committed a net $1.16 billion to the funds that hold
them after record high inflows of $2.74 billion the previous
week. 
    Riskier high-yield bond funds, meanwhile, had net outflows
of $1.31 billion, the most pulled out of the funds since early
June. 
    As investors abandoned risky securities, safe-haven bonds
saw modest demand. U.S. Treasury funds had inflows of $373.7
million while funds that hold government-guaranteed mortgage
bonds had inflows of $232.3 million.
    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          -3.253    -0.12    2,751.946  10,001
 Domestic Equities         -4.788    -0.23    2,064.452  7,401
 Non-Domestic Equities     1.535     0.22     687.495    2,600
 All Taxable Bond Funds    0.287     0.02     1,486.029  4,649
 All Money Market Funds    -5.497    -0.24    2,294.736  1,388
 All Municipal Bond Funds  0.706     0.22     320.778    1,340
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