U.S. funds get flight-to-safety cash flows-EPFR

By Daniel Bases

NEW YORK, Oct 3 (Reuters) - In the depths of the credit crisis and the initial rejection of the U.S. financial bailout plan, U.S. stock and money market funds took in more cash than any other fund group, data from EPFR Global showed on Friday.

"For all the talk, the U.S. is sneezing and at least in terms of fund flows, everyone else is catching a cold," said Cameron Brandt, global markets analyst at the Boston-based firm.

"Not necessarily true in terms of their economies' relations to the U.S. but investors are basically reverting to old habits. We have money going to the U.S. pretty much regardless of what it does," he said.

The fund-tracker said in the week ended Oct. 1 U.S. stock funds took in a net $7.99 billion, a fifth straight week of gains. In the third quarter, U.S. funds took in a net $42 billion of fresh cash but for the year they suffered outflows of $15.6 billion.

Money market mutual funds took in a net $5.947 billion last week. For the quarter, this fund group took in a net $40.88 billion in fresh cash, bringing the year-to-date total to $137.2 billion.

On Friday the U.S. House of Representatives passed the $700 billion financial bailout plan which was quickly signed by U.S. President George W. Bush. The plan is meant to underpin banks and other financial firms straining under bad mortgage-related assets.

According to Brandt, the pattern of fund flows is showing a flight-to-safety quality, not seen recently.

"In the last month of a quarter, people move money in to basically make a bet on the rebalancing of the big index funds... The money comes in but usually this week you would see a big outflow. The money is not just coming in for a tactical reasons. It is staying," Brandt explained.

In another recent development, Japanese funds strung together a second straight week of inflows. Investors put in a net $294.5 million last week. For the year however, outflows are $5.98 billion.

Long-only dedicated emerging market stock funds managed to take in a net $146.3 million in the latest week. That was small consolation for the sector which had net outflows of $20.538 billion in the third quarter.

All emerging market funds combined had a net outflow of $32.8 billion year-to-date versus a $20.6 billion inflow in the same period a year ago.

For emerging market stocks, the benchmark MSCI index suffered its worst quarter on record, falling 27.61 percent .MSCIEF.

Latin American stock funds had outflows for a 17th straight week, losing $361 million to redemptions. For the quarter, the fund sector had $5.176 billion in net outflows, bringing the cumulative amount for the year to a negative $4.175 billion. In the same period a year ago this sector took in a net $8.2 billion in fresh cash.

EMEA funds (Europe, Middle East, and Africa) had redemptions of $310.674 million, the 13th week of outflows in the last 14 weeks. The third quarter pulled the sector into the negative column as $4.7 billion was pulled out bringing the year-to-date total to an outflow of $1.86 billion.

Among the various sector fund groups for the latest week, energy had outflows of $1.288 billion, financials lost $942 million to redemptions while real estate funds had a net $703.5 million pulled out.