By Sam Forgione
NEW YORK Jan 3 Stock funds worldwide attracted
$4.4 billion in new cash in the latest week, bringing record
inflows to about $251 billion last year after the U.S. Federal
Reserve's bond-buying stimulus fueled record highs in U.S.
stocks, according to a research report released on Friday.
Funds that specialize in U.S. stocks attracted $2.8 billion
for week, bringing inflows to about $115 billion in 2013, data
from Bank of America Merrill Lynch Global Research showed.
The Fed's $85 billion in monthly purchases of Treasuries and
agency mortgage securities, implemented in an effort to spur
hiring and lower long-term borrowing costs, kept bond yields low
and drove demand for riskier assets like stocks.
The Standard & Poor's 500 stock index repeatedly
setting record highs throughout the year. The index ended the
year up 29.6 percent, marking its best year since 1997.
"It certainly was a greater rate of return than most would
have predicted," said Rick Meckler, president of investment firm
LibertyView Capital Management. Meckler said there was few
alternatives to stocks, given low bond yields.
Investors committed $1.7 billion to funds that hold European
stocks over the latest week, according to data from the report,
which also cited data from fund-tracking firm EPFR Global. The
weekly inflows resulted in record $48 billion inflows for the
Data released in mid-August showed the euro zone exited a
1-1/2 year-long recession in the second quarter of last year,
and many investors have sought bargains in European stocks amid
signs of improving prospects in the region.
Funds that hold Japanese stocks attracted $500 million in
the latest week, bringing flows to a record $43.7 billion last
year, the data showed. Tokyo's Nikkei average rose to a
six-year high on Dec. 26 and ended the year up 56.7 percent,
buoyed by Japan's aggressive fiscal and monetary stimulus.
Bond funds worldwide had outflows of $1.7 billion over the
week, leading to meager inflows of $1.4 billion in 2013. Funds
that hold Treasury Inflation-Protected Securities attracted $80
million in the latest week, however, marking the first inflows
in 38 weeks.
Fed Chairman Ben Bernanke triggered a selloff in the bond
market and ongoing outflows from bond funds on May 22 when he
told Congress the central bank could begin reducing its monthly
bond-buying later in the year.
Through the end of the year, the yield on the benchmark
10-year U.S. Treasury rose about 140 basis points from a yearly
low of 1.62 percent on May 2. Investors feared a pullback in the
Fed's bond-buying would hurt bond prices by causing rates to
In mid-December, the central bank announced a cut of $10
billion to its monthly bond-buying, starting in January.
Investors pulled $15.6 billion out of emerging market bond
funds in 2013. Analysts said they soured on the assets due to
fears Fed action would hurt their prices.
Fears of rising interest rates led to sizable inflows of $58
billion into floating-rate loan funds in 2013, the report
showed. The securities in the funds are protected from rising
interest rates by being pegged to floating-rate benchmarks.
Commodities funds, which mainly hold physical gold, had
outflows of $800 million over the week, leading to record
outflows of $46.1 billion in 2013. Gold sank by 28 percent in
2013, its biggest annual loss in 32 years, as the Fed announced
The record inflows into stock funds resulted in investors
pulling $56.5 billion from safe money market funds last year.
The funds hold low-risk securities and are viewed as a place to