By Sam Forgione
NEW YORK, March 21 U.S.-based stock funds
recorded inflows of just $1.9 billion in the latest week as
worries over Cyprus's debt burden disrupted demand for
international stocks, data from Thomson Reuters' Lipper service
showed on Thursday.
The drop in demand in the week ended March 20 came after
investors poured $11.26 billion into the funds in the previous
week to capitalize on the Dow Jones Industrial Average's
nine-day winning streak.
A scant $297.3 million flowed into funds that hold stocks
outside of the United States as Cyprus, an island in the
17-nation euro currency bloc, flirted with default on its debt.
Over the previous week, the funds had gained $2.54 billion in
The news about Cyprus over the week had a considerable
effect on demand for international stock funds, said Jeff
Tjornehoj, head of Americas research at Lipper.
Reuters had previously reported outflows of $1.78 billion
from non-domestic stock funds over the week, based on Lipper's
original data report. Those outflows would have led to total
outflows of $194.7 million from U.S.-based stock funds.
Lipper has since revised its data, however, to show the
Exchange-traded funds that hold emerging market stocks were
particularly hard hit, as investors redeemed $1.36 billion.
Mutual funds that invest in emerging market countries, however,
attracted $854 million in new cash.
ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
Despite the Dow's retreat from its record-breaking rally
over the latest week, funds that hold U.S. stocks still
attracted $1.58 billion in new cash, owing to healthy demand for
stock mutual funds.
Mutual funds that hold U.S. stocks raked in $1.6 billion in
new money, the most in seven weeks. Investors pulled back,
however, from opportunistic positions in U.S. exchange-traded
funds and removed $10.3 million. The ETFs attracted $7.3 billion
the prior week.
Lipper's weekly data tracks funds based exclusively in the
U.S., but distinguishes these funds based on the countries they
Over the week, the euro zone struck a deal with Cyprus to
provide rescue loans worth 10 billion euros ($13 billion) to the
nation, but imposed a levy that would cost those with cash in
the island's banks between 6.75 and 9.9 percent of their money.
Cyprus's parliament rejected the levy, bringing the nation
one step closer to default on its debt. The European Central
Bank, however, stepped in and assuaged fears by saying it was
committed to providing liquidity within certain limits.
The Dow was up just 0.4 percent over the reporting period,
while the benchmark S&P 500 rose 0.27 percent, as worries
over crisis rippled through stock markets.
Jitters over Cyprus gave investors reason to seek greater
safety in bond funds. Taxable bond funds reaped inflows of $5.2
billion over the weekly period, up from gains of $1.23 billion
the previous week.
"Bond funds gave investors a reasonable outlet" over the
latest week, Tjornehoj said.
Investment-grade corporate bond funds pulled in $2.35
billion in new money, the most since early November of last year
as investors sough higher-quality debt.
Included in those inflows were cash gains of $1.55 billion
into corporate loan funds, a weekly record. The securities offer
"floating rates" that protect against an inflationary
environment, in which interest rates rise.
Riskier high-yield "junk" bond funds, meanwhile, had inflows
of just $200.9 million. Those still marked the second week of
inflows into the funds in seven weeks.
Money market funds, which are low-risk vehicles that invest
in short-term securities, suffered large outflows of $25.54
billion over the period as institutional investors redeemed
large sums of cash. Retail investors, however, put over $1
billion into the funds.
The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.