U.S.-based bond funds post $8.2 billion outflows, biggest since Aug. 2013: ICI

NEW YORK Wed Aug 13, 2014 2:35pm EDT

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NEW YORK (Reuters) - Investors in U.S.-based mutual funds pulled $8.2 billion out of bond funds in the week ended Aug. 6, marking their biggest weekly outflows in nearly a year, data from the Investment Company Institute showed on Wednesday.

The outflows were the biggest since late August 2013 and were the first withdrawals since early February, according to data from ICI, a U.S. mutual fund trade organization. Stock funds posted $422 million in outflows.

The large withdrawals put a dent in this year's recovery in demand for bond mutual funds. Bond funds had attracted $58.9 billion in inflows through July 30, recovering much of last year's record outflows of $79.6 billion, according to the latest ICI data.

The latest weekly net outflow from bond funds included flows for high-yield bond funds. Some investors have warned of those bonds being overvalued. U.S.-based funds that hold the bonds posted record net outflows of $7.1 billion over the same reporting period as ICI, according to Lipper data released last week.

The Lipper data included flows for both mutual funds and exchange-traded funds, while the ICI data only tracks mutual funds. ICI could not immediately specify the latest outflows from high-yield bond funds, ICI spokeswoman Inga Vitols said.

"It was a bit of a reflection of the high-yield market getting a bit stretched in valuation," said Michael Temple, portfolio manager at Pioneer Investments in Boston, on the latest ICI flows. He said the outflows likely stemmed from withdrawals from high-yield bond funds.

The outflows from stock funds came after inflows of $204 million the previous week. U.S.-focused stock funds posted $3.1 billion in outflows, while funds that specialize in non-U.S. stocks attracted $2.6 billion in inflows, marking their biggest inflows in eight weeks.

Investors have recently noted cheaper valuations in international stocks compared to U.S. stocks.

Investors also soured on hybrid funds, which can invest in both stocks and fixed-income securities, pulling $799 million out of the funds in the latest week. That marked their first outflows since early May and their biggest withdrawals since last December, according to ICI data.

(Reporting by Sam Forgione, editing by G Crosse)

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