U.S.-based stock funds attract $7 billion in latest week: Lipper

NEW YORK Thu Feb 27, 2014 6:34pm EST

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NEW YORK (Reuters) - Investors in U.S.-based funds poured $7 billion into stock funds in the week ended Wednesday, showing a steady appetite for risk on a rebound in stock market performance, data from Thomson Reuters' Lipper service showed on Thursday.

The new money into stock funds in the week ended February 26 marked the third straight week of inflows. The three-week run of $25 billion of new cash into the funds exceeded the outflow of $21 billion in the week ended February 5.

"After losing their way in January, investors have returned to equity funds with a lot more optimism," said Jeff Tjornehoj, head of Americas research at Lipper. He cited three straight weeks of positive returns for all stock funds tracked by Lipper after losses earlier this year.

The S&P 500 stock index, which fell 5.2 percent from the start of the year through February 5, has rebounded and risen 5.4 percent since that date through Wednesday.

A lively environment for mergers also rekindled investors' appetite for stocks in the latest week, said Pat Keon, research analyst at Lipper. He cited Facebook Inc.'s recent $19 billion acquisition of mobile-messaging startup WhatsApp.

The Standard & Poor's 500 stock index, which hit a record intraday high on February 24, rose 0.9 percent over the weekly period. Investors discounted mixed U.S. economic data, including weak consumer confidence and strong new home sales in January.

Many investors have attributed weak U.S. economic data to frigid temperatures across much of the nation rather than to a broader economic slowdown. The inflows into stock funds also showed healthy risk appetite despite geopolitical tension in Russia and Ukraine.

Stock exchange-traded funds attracted $4.5 billion of the net inflows into stock funds, while stock mutual funds attracted $2.5 billion of the net inflows. ETFs are believed to represent the institutional investor, while mutual funds are commonly purchased by retail investors.

While stock funds overall attracted net inflows, funds that hold emerging market stocks posted outflows of $1 billion, reversing inflows of $361 million over the prior week.

The outflows came as tensions surrounding emerging market nations Russia and Ukraine led President Vladimir Putin to put Russian combat troops on high alert for war games near Ukraine on Wednesday. MSCI's global emerging market equities index fell 0.3 percent over the weekly period.

The broad appetite for risk in stocks did not keep investors from pouring $16.1 billion into low-risk money market funds over the reporting period, reversing outflows of $43 billion over the prior week, which were the biggest outflows since October.

Some investors may have responded to uncertainty over mixed U.S. economic data and issues in Russia and Ukraine by putting cash into the money market funds over the week, Keon of Lipper said. The funds typically invest in safe short-term securities.

Taxable bond funds attracted $3.2 billion in new cash, marking their eighth straight week of inflows.

The risk-on sentiment showed in inflows of $559 million into funds that hold riskier high-yield junk bonds, while funds that mainly hold safe-haven Treasuries posted outflows of $376 million.

Commodities and precious metals funds, which mainly invest in gold futures, attracted $430 million in new cash, marking their biggest inflows since October 2012.

The inflows came even as gold prices retreated on Wednesday after hitting four-month highs as the dollar advanced and the new home sales data dented bullion's safe-haven appeal.

The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.

(Reporting by Sam Forgione; Editing by James Dalgleish and David Gregorio)

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