NEW YORK 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 November 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).
(Reporting by Sam Forgione; Editing by Todd Eastham)