By Sam Forgione
NEW YORK, Jan 3 Investors in U.S.-based funds
pumped $7.17 billion into stock exchange-traded funds in the
latest week while pulling money out of bond funds as U.S.
lawmakers struck a deal to avert the "fiscal cliff" of tax hikes
and spending cuts, data from Thomson Reuters' Lipper service
showed on Thursday.
The flood of cash into stock ETFs in the week ended Jan. 2
is the most in three weeks, and offset outflows of $3.48 billion
from stock mutual funds.
The combination of inflows into stock ETFs and outflows from
stock mutual funds resulted in net inflows of $3.7 billion into
stock funds overall for the week.
Bond funds, meanwhile, started the year with net outflows of
$330.2 million as investors withdrew $412.7 million from bond
ETFs and committed just $82.5 million to bond mutual funds.
Bond funds were largely favored in 2012 for their stable
returns and safety relative to stock funds, and suffered
outflows in just five reporting weeks throughout the year.
ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
"Institutional investors had a better feeling that an
agreement would be reached before the deadline and therefore
anticipated a bump up in the markets," said Jeff Tjornehoj, head
of Americas Research at Lipper.
The benchmark S&P 500 stock index rose 3 percent over
the reporting period, with markets surging after U.S. President
Barack Obama and Congress reached a deal to prevent the looming
"fiscal cliff" of $600 billion in tax increases and spending
cuts that threatened to tip the U.S. economy into a recession.
The last-minute deal reached on Tuesday included an income
tax increase on families earning more than $450,000 per year and
limits on the amount of deductions they can take to lower their
tax bill. Not all issues were resolved, however, and spending
cuts of $109 billion in military and domestic programs were
delayed for just two months.
Institutional investors put $3.8 billion into the SPDR S&P
500 ETF, but also ventured outside the U.S. and gave $2.7
billion to international stock ETFs. Emerging markets were a
bright spot as $944 million in new cash flowed into the
iShares:MSCI Emerging Market fund.
The flows into emerging market ETFs may have been
opportunistic, said Tjornehoj of Lipper, as investors might have
anticipated that a budget deal in the U.S. could send emerging
market stocks higher.
With regard to bond ETFs, the outflows of $412.7 million
from showed modest improvement from the prior week, when
investors pulled $872.2 million from the funds.
Retail investors in particular soured on high-yield bond
mutual funds and withdrew $281.8 million, while institutional
investors pulled $190.9 million out of high-yield bond ETFs.
"There's a sense that, if equities are turning the corner,
why hold the proxy" said Tjornehoj of Lipper on investors'
flight from high-yield corporate bonds, which are seen by some
as a safer, debt version of stocks.
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 3.688 0.13 2,981.445 10,013
Domestic Equities 0.845 0.04 2,211.788 7,419
Non-Domestic Equities 2.843 0.38 769.657 2,594
All Taxable Bond Funds -0.330 -0.02 1,511.830 4,763
All Money Market Funds 37.841 1.61 2,392.317 1,353
All Municipal Bond Funds -0.013 -0.00 318.174 1,336