By Sam Forgione
NEW YORK Dec 19 Investors in U.S.-based funds
pulled $31.3 billion out of money market funds in the latest
week to meet year-end payments on taxes and other expenses, data
from Thomson Reuters' Lipper service showed on Thursday.
All of the withdrawals in the week ended Dec. 18 came from
institutional money market funds, the data showed. The outflows
were the biggest since mid-October, when investors pulled over
$43 billion out of the funds on fears of a potential U.S.
default on its debt.
Institutional investors pulled cash out of the funds in
order to pay year-end tax bills and other expenses like employee
compensation, said Barry Fennell, senior research analyst at
The funds, which are low-risk vehicles that typically invest
in short-term securities, are viewed as a safe place to park
cash. They often invest in short-dated U.S. government
Investors also pulled $933 million out of commodities and
precious metals funds, which mainly invest in gold futures,
marking the biggest withdrawals from the funds since July. The
funds have had outflows for the past 12 weeks.
Investors withdrew cash from the funds on the conviction
that the rally in U.S. stocks this year could persist without
the aggressive monetary easing of the Federal Reserve, said
The Standard & Poor's 500 stock index has rallied
nearly 27 percent this year. The Fed's $85 billion in monthly
bond purchases has kept interest rates low and led investors to
seek higher income in stocks and other risky securities.
The confidence in the staying power of the rally has hurt
demand for gold, which is viewed as a safe-haven commodity,
The central bank surprised investors on Wednesday by
announcing a cut of $10 billion a month to its monthly bond
purchases, reducing them to $75 billion a month. Uncertainty
over when the Fed would begin to wind down its monthly bond
purchases has troubled market sentiment for much of this year.
Stocks on Wall Street rallied more than 1 percent on the
surprise Fed announcement. The S&P 500 rose 1.6 percent over the
reporting period, despite concerns of a potential downturn in
U.S. markets on the heels of a reduction in Fed stimulus.
Reuters had earlier reported outflows of $13.3 billion from
equity funds over the weekly reporting period, including
outflows of $8.5 billion from stock mutual funds. Lipper later
said that the figures were incomplete.
"Apparent outflows coupled with an awkward timing between
fund accounting for distributions and Lipper's Wednesday fund
flows data cutoff left flows estimation incomplete for this
week," said Jeff Tjornehoj, head of Americas research at Lipper.
Reuters had also earlier reported outflows of $4.2 billion
from taxable bond funds. Tjornehoj said, however, that the
outflows were overstated for many equity and taxable bond funds.
Fennell said that the flows for money market funds and
commodities and precious metals funds were unaffected by the