UPDATE 1-U.S.-based stock funds attract $10.3 bln inflow -Lipper

Thu Mar 6, 2014 7:22pm EST

By Sam Forgione
    NEW YORK, March 6 (Reuters) - Investors in U.S.-based funds
poured $10.3 billion into stock funds in the week ended
Wednesday on reassurance that the U.S. economy is on better
footing and reduced geopolitical tension, data from Thomson
Reuters' Lipper service showed on Thursday. 
    The inflows into stock funds in the week ended March 5
marked the fourth straight week of new cash into the funds.
Funds that specialize in U.S. stocks attracted $8.9 billion of
the net inflows, marking their biggest inflows since late
December. 
    The sizeable inflows showed investors' conviction that U.S.
stocks, which hit multiple record highs over the weekly period,
could continue to rally after a rough start to the year on
greater strength in the U.S. economy. 
    "There is a lot of momentum in the market right now," said
Jeff Tjornehoj, head of Americas research at Lipper. 
    The Standard & Poor's 500 stock index hit record
highs and rose 1.6 percent over the weekly period on some strong
U.S. economic data, signals from Federal Reserve chair Janet
Yellen that cold weather was behind recent signs of weakness in
the U.S. economy, and reduced fears of Russian military force in
Ukraine. 
    Safer taxable bond funds, meanwhile, posted $4.9 billion in
outflows over the weekly period, marking their first withdrawals
in nine weeks and underscoring investors' appetite for riskier
assets.
    Funds that mainly hold safe-haven U.S. Treasuries posted a
record $7 billion in outflows, the biggest since Lipper records
began in 1992. Big outflows from the iShares: 1-3 Year Treasury
Bond ETF and the iShares: 3-7 Year Treasury Bond ETF
 accounted for nearly all of the withdrawals.
    ETFs are thought to represent the behavior of institutional
investors, while mutual funds are commonly purchased by retail
investors. Mutual funds that hold Treasuries attracted a small
$85 million in new cash over the week. 
    Tjornehoj said that asset manager Good Harbor Financial
likely pulled large sums of cash out of the two ETFs in an
unwinding of bets on Treasury bonds made roughly a month
earlier.  
    "Whatever the sentiment is in the overall market, it appears
to be overwhelmed by an isolated trade," Tjornehoj said. 
    While Treasury funds posted outflows, funds that mainly hold
inflation-protected Treasuries attracted $208 million in new
cash, marking their strongest demand since September 2012 and
their first inflows in six weeks.
    Some investors view the Fed's expected plan of continued
cuts to its monthly bond-buying program as a sign of strength in
the U.S. economy, and are preparing for higher inflation as a
result of that stronger economic growth, Tjornehoj said.
    Outflows of $2.6 billion from money market funds, which are
low-risk vehicles typically used to store cash, underscored
investors' willingness to put money to work in stock funds. The
outflows reversed inflows of $16 billion over the prior week. 
    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        10.332     0.26     4,009.533   10,646
 Domestic Equities       8.928      0.30     3,008.666   7,804
 Non-Domestic Equities   1.404      0.14     1,000.867   2,842
 All Taxable Bond Funds  -4.858     -0.28    1,711.632   5,341
 All Money Market Funds  -2.552     -0.11    2,369.765   1,323
 All Municipal Bond      0.099      0.04     281.694     1,444
 Funds