September 3, 2014 / 3:35 PM / in 3 years

U.S.-based stock funds return to outflows in latest week - ICI

By Sam Forgione
    NEW YORK, Sept 3 (Reuters) - Investors in U.S.-based mutual
funds pulled a net $586 million out of stock funds in the week
ended Aug. 27 on a retreat from highly-valued U.S. shares, data
from the Investment Company Institute showed on Wednesday.
    The outflows were the first in three weeks and came after
inflows of $2.7 billion the prior week, which were the biggest
since April, according to data from ICI, a U.S. mutual fund
trade organization. Bond funds attracted $3.7 billion in new
    Investors soured on funds that specialize in U.S. stocks and
pulled $2.2 billion from the funds, resulting in the net
outflows. Funds that mainly hold international stocks attracted
$1.6 billion, continuing an inflow streak that began in May
    "People are seeing the U.S. as fully valued," said Wayne
Lin, portfolio manager at QS Investors in New York. He said
investors were taking profits after record highs in U.S. share
prices and shifting into stocks in regions such as Europe and
Japan, where valuations are more attractive. 
    He said hopes for a program of asset purchases, or
quantitative easing, from the European Central Bank boosted
demand for European stocks. 
    "If you have the ECB do something unconventional to spur
growth, then you may see a nice bump up in the valuations and in
the multiples in Europe," Lin said. 
    The inflows into bond funds, while down from hefty inflows
of $5 billion the prior week, marked the third straight week of
new money into the funds. 
    "People aren't as averse to fixed income, as worried about
increases in interest rates as they were," said Lin of QS,
citing reassuring comments from Federal Reserve Chair Janet
Yellen at a central bank symposium in Jackson Hole, Wyoming on
Aug. 22.
    Yellen said at the annual Jackson Hole retreat that the U.S.
labor market is still bruised from the Great Recession and that
the Fed should move cautiously in determining when interest
rates should rise.
    Hybrid funds, which can invest in stocks and fixed income
securities, attracted $942 million, marking their biggest
inflows in four weeks. 
    The benchmark S&P 500 stock index rose 0.7 percent
over the week and closed above the 2,000 milestone for the first
    The following table shows estimated ICI flows for the past
five weeks (all figures in millions of dollars):
                      8/27/2014    8/20    8/13     8/6    7/30
 Total equity              -586   2,671     321    -431     118
    Domestic             -2,207     738    -973  -3,073  -1,171
    World                 1,621   1,933   1,294   2,642   1,290
 Hybrid*                    942     821     495    -413   1,024
 Total bond               3,685   4,999   1,436  -8,193   1,806
    Taxable               2,954   4,185     539  -8,658   1,119
    Municipal               731     814     897     465     687
 Total                    4,041   8,490   2,251  -9,038   2,949
 *Hybrid funds can invest in stocks and/or fixed income

 (Reporting by Sam Forgione; Editing by Grant McCool)
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