| NEW YORK
NEW YORK Jan 4 Investors poured $5.06 billion
into stock funds worldwide in the latest week, as the appetite
for risk rose after U.S. lawmakers cobbled together a
last-minute tax deal that avoided the worst of the so-called
fiscal cliff, data from EPFR Global showed on Friday.
Funds that hold emerging market stocks attracted $3.37
billion of the net $5.06 billion taken in by all stock funds in
the week ended Jan. 2, the fund-tracking firm said. Funds that
hold U.S. stocks, by comparison, attracted $706 million.
"Investors were optimistic that a deal would be reached,"
said Jack Ablin, chief investment officer of BMO Private Bank,
referring to the U.S. budget deal. He added that going into the
final week of 2012, emerging market stocks were generally seen
as "insulated" from the "fiscal cliff" drama in Washington.
The EPFR reporting period coincided with Congress and
President Barack Obama reaching a deal to raise taxes on the
wealthiest U.S. citizens while postponing a series of sharp
federal budget cuts for about two months.
Even though some believe U.S. lawmakers only postponed the
tough decision of dealing with the federal deficit, U.S. stock
markets rallied strongly after the deal and so-called safe
assets like U.S. Treasuries have sold off mightily in the early
days of 2013.
The benchmark S&P 500 stock index rose 3 percent over
the reporting period. The benchmark 10-year Treasury yield,
which ended 2012 at 1.76 percent, surged to 1.93 percent in
The move toward risk was seen in bond funds generally. For
the fourth straight week, bond funds worldwide failed to gain as
much new cash as stock funds, and pulled in $2.29 billion. Of
that sum, U.S. bond funds took in just $336 million.
In an interview on Wednesday, Jeffrey Gundlach, chief
investment officer and chief executive of DoubleLine Capital,
said that weaker cumulative returns from bond funds this year
are likely to drive money out of the funds.
"Returns are not likely to be as high, perhaps, as people
naively expect them to be," Gundlach said, referring to bond
funds' trailing 12-month performance. "Inflows into bonds are
very likely to decline over the course of 2013 based upon this
Flows into exchange-traded funds and products in the United
States reached a record $1.35 trillion at the end of 2012,
research and consultancy firm ETFGI said on Thursday.
European stock funds suffered outflows of $340 million after
attracting $913 million the prior week as investors favored
funds that hold European debt, which attracted $287 million in
new money, EPFR global said.
In another sign that risk is back in fashion, high-yield
"junk" bond funds gained $1.26 billion in new cash, the most in
three weeks. Investors also targeted emerging market bonds and
committed $1.28 billion to funds that hold them.
"As long as the Federal Reserve keeps a blanket over
interest rates, high-yield should do pretty well," said Ablin of
BMO Private Bank.
European bond funds attracted $287 million in new cash, a
slightly weaker turnout than inflows of $343 million the prior