U.S.-based stock mutual funds post $6.5 billion outflow, biggest of year: Lipper

NEW YORK Thu Dec 12, 2013 6:42pm EST

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NEW YORK (Reuters) - Investors in U.S.-based funds pulled $6.5 billion out of stock mutual funds in the week ended Wednesday, marking the biggest weekly outflows this year, on worries the U.S. Federal Reserve could scale back its bond purchases as soon as next week, data from Thomson Reuters' Lipper service showed on Thursday.

The outflows from stock mutual funds in the week ended December 11 marked the biggest withdrawals from the funds this year and since August 2011. Mutual funds are often purchased by retail investors.

Stock funds overall had outflows of $1.8 billion over the weekly period, marking the first net withdrawals from the funds in five weeks.

"There was some reason for caution," said Jeff Tjornehoj, head of Americas research at Lipper. "No one wants to be left at the top of the market."

The Fed's $85 billion in monthly purchases of Treasuries and agency mortgages have helped boost the Standard & Poor's 500 stock index 24.5 percent this year. The bond-buying program has kept interest rates low, leading investors to seek higher income in riskier assets such as stocks.

The index fell 0.6 percent over Lipper's weekly reporting period, however, after robust U.S. economic data and a budget deal in Washington stoked fears that the Fed will begin reducing the pace of its purchases during its next meeting on December 17-18.

Funds that specialize in U.S. stocks had outflows of $2.6 billion, marking the biggest outflows from the funds in five weeks and resulting in the overall outflows from stock funds over the weekly period.

Funds that hold stocks of companies outside the United States, meanwhile, attracted about $830 million, marking the lowest inflows into the funds in four weeks.

Investors pulled about $553 million out of emerging market stock funds in the week ended Wednesday. The funds have benefited from the Fed's bond-buying this year and lost fans in the latest week on fears of a Fed pullback, Tjornehoj said.

Taxable bond funds saw outflows of $689 million, marking their biggest outflows in eight weeks. investors pulled cash out of taxable bond funds on worries that interest rates could spike higher if the Fed reduces its stimulus, said Tjornehoj.

However, funds that hold investment-grade corporate bonds, attracted $1.7 billion in new cash, marking their biggest inflows in five weeks.

Low-risk money market funds attracted $2.8 billion over the reporting period, marking the fourth straight week of inflows into these funds. The funds are typically viewed as a safe place to park cash during bouts of volatility.

(Reporting by Sam Forgione, editing by G Crosse and Andrew Hay)

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