Big inflows continue into U.S.-based stock mutual funds -Lipper

Thu Jan 17, 2013 8:27pm EST

By Sam Forgione
    NEW YORK, Jan 17 (Reuters) - Investors in U.S.-based funds
pumped $3.75 billion into stock mutual funds in the latest week,
a continuation of the prior week's massive inflow and suggesting
a trend of retail investors putting money back to work in the
stock market, data from Thomson Reuters' Lipper service showed
on Thursday. 
    The new sum, which spans the week ended Jan. 16, is roughly
half the previous week's huge inflow of $7.53 billion into stock
mutual funds, which was the most new cash since 2001. The two
sums combined, however, amount to $11.3 billion, which is the
biggest two-week gain since April 2000, Lipper analyst Matthew
Lemieux said.
    Bond funds, meanwhile, attracted $4.63 billion in net new
cash. Bond mutual funds raked in $4.21 billion of that sum,
which was modestly less than the previous week's strong inflows
of $5.45 billion. Bond ETFs regained some favor with inflows of
$417.82 million after investors pulled $1.21 billion out of the
funds the previous week.
    The big inflows into stock mutual funds mark a reversal in
sentiment from last year, when investors pulled a total of $129
billion out of the funds while pouring $258 billion into bond
mutual funds. 
    "It's definitely a good indicator for investors going back
into equities," said Lemieux on the inflows into equity mutual
funds in the past two weeks.
    "The combined direction of the two weeks may indicate that
this shift back towards equity mutual funds may have some legs,"
he added.
    The enthusiasm for stock mutual funds did not apply to stock
ETFs, which suffered outflows of $3.5 billion. The outflows are
the first losses for the funds in eight weeks, and mark a
reversal from the previous week's big gains of $10.78 billion.
Investors turned particularly cold toward the SPDR S&P 500 ETF
fund, from which they pulled $4.21 billion.
    ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
    Lemieux of Lipper said that institutional investors may have
taken profits from the passive stock ETFs and instead opted to
invest more actively. 
    When combined, the sizeable inflows into stock mutual funds
and the big outflows from stock ETFs produce a total figure of
just $286 million into equity funds overall, which is sharply
lower than the previous week's total inflow of $18.32 billion,
which was the most net new cash into equity funds since 2008.
    The S&P 500 rose a slight 0.8 percent over the reporting
period. Federal Reserve Presidents James Bullard, Charles
Plosser and Charles Evans voiced their optimism about U.S.
growth for 2013, while upbeat U.S. retail sales for December and
strong corporate earnings for major banks JPMorgan Chase 
and Goldman Sachs also boosted markets.
    Investors remained cautious, however, in light of Republican
opposition in Congress to increase the $16.4 trillion U.S. debt
ceiling. A failure to raise the government's borrowing limit
could cause the United States to default on its debt in coming
months.
    With regard to the $3.75 billion inflow into stock mutual
funds, those that specialize in U.S. stocks attracted $1.41
billion of that sum, while mutual funds that hold international
stocks attracted the remaining $2.34 billion.
    Investors in bond funds favored higher quality and gave
$2.02 billion to investment-grade corporate bond funds. The
figure represents the total amount pumped into both mutual funds
and ETFs that hold investment-grade bonds.
    Lemieux of Lipper said that consistent inflows into
investment-grade corporate bond funds show that investors are
still opting for some safety. 
    High-yield "junk" bond funds attracted just $571 million
overall, indicating the decreased appetite for risky bonds
compared with the previous week, when the funds attracted $1.11
billion in new cash.
    Investors also sought flexible funds, which can invest in a
wide range of securities including both stocks and bonds
worldwide, and pumped $1.47 billion into the funds. That is the
most since August of last year.
    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          0.286     0.01     3,042.918  10,145
 Domestic Equities         -4.181    -0.19    2,255.468  7,523
 Non-Domestic Equities     4.467     0.57     787.450    2,622
 All Taxable Bond Funds    4.625     0.30     1,531.942  4,824
 All Money Market Funds    -9.603    -0.40    2,402.327  1,363
 All Municipal Bond Funds  1.443     0.45     324.824    1,348