August 18, 2011 / 11:11 PM / 8 years ago

UPDATE 1-Stock, bond fund outflows slow in Aug 17 week-Lipper

 * Weekly equity fund outflows $3.1 billion
 * Domestic equities suffer lion's share of outflows
 * Taxable bond funds outflows at 3 weeks straight
 * Equity income funds pull in record net $1.14 bln  (Updates with comment, data, background, adds byline)
 By Daniel Bases
 NEW YORK, Aug 18 (Reuters) - Investors tapered the pace of net redemptions in their U.S. stock and bond funds in the week ended Aug. 17, a period when market volatility slipped from recent highs, data from Lipper showed on Thursday.
 U.S.-domiciled equity funds had net outflows of $3.1 billion, versus $14.4 billion of outflows the prior week.
 Taxable bond funds had net outflows of $315 million, versus $6.9 billion in outflows the prior period. This marks the third straight week of net redemptions and the longest outflow streak since late February and early March 2009.
 "I was surprised investors were as steadfast this week. Last week the market declined 11 percent and we saw significant outflows. I would figure that that memory would pull more investors to the sidelines and cause more redemptions," said Jeff Tjornehoj, senior research analyst at Lipper.
 "But that didn't happen... I thought the hangover and the pounding people received would have lingered. Investors used it to buy on the dip," he said.
 Money market funds, a traditional safe-haven destination for investors unsure of where to put their cash, had net inflows of $13.9 billion, down from the previous week's net inflow of $47.5 billion.
 During the reporting week, the benchmark Standard & Poor's 500 index .SPX rose 6.5 percent. It was also a week in which the CBOE Volatility Index .VIX, referred to as Wall Street's "fear index," was off its most negative levels in over a year.
 Those performances stand in sharp contrast to Thursday's stock market sell-off on growing concerns the United States is heading into another recession. Also on Thursday, the benchmark 10-year Treasury bond yield fell as low as 1.97 percent, smashing through the previous low yield of 2.038 percent.
 But even before recession concerns solidified, investors were pulling their cash, broadly, out of both stocks and bonds.
 Given the record low yields on benchmark U.S. Treasuries, investors ramped up spending on equity income funds in search of higher returns. They plowed a record net inflow of $1.14 billion into the sector, the Lipper data shows.
 "The yield on the S&P 500 is higher than the 10-year Treasury and no one chirps about how great a yield equities have right now, but it is better than 10 year Treasuries. It is about 2.12 percent on equities and 2.05 percent on Treasuries," said Tjornehoj.
 Gold and natural resource funds pulled in a net $685 million. During the reporting week, gold prices were little changed, but still hovering at record highs. On Thursday, spot gold prices extended their record rally even further, closing in on $1,830 an ounce XAU=.
 In contrast, the world's largest gold-backed exchange-traded fund, SPDR Gold Trust (GLD), saw net redemptions of $1.4 billion, one of the largest moves for the week among ETFs tracked by Lipper.
 Excluding exchange-traded funds, which anecdotally represent institutional trade flows, investors pumped a net $1.7 billion into equity funds.
 High yield bond funds suffered a third straight week of outflows, losing $407 million to net redemptions. That was significantly less than the $3.4 billion drubbing experienced the week before.
 Funds focused on U.S. Treasuries suffered a reversal, with a net outflow of $457 million versus an inflow of $748 million in the previous week.
 Emerging market debt funds had outflows of $166 million, which stood in contrast to the $447 million of net inflows for emerging market equity funds, thereby breaking a two week streak of net redemptions..
 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     Change     Total     Share
                      Change  in Assets    Assets    Class
                                (pct)                Count ============================================================= All Equity Funds         -3.079   -0.12     2,625.520  10,231 - Domestic Equities      -3.066   -0.17     1,930.121   7,740 - Non-Domestic Equities  -0.013   -0.00       695.399   2,491 All Taxable Bond Funds   -0.315   -0.02     1,387.773   4,321 All Money Market Funds   13.851    0.58     2,387.771   1,509 All Municipal Bond Funds -0.323   -0.10       330.356   1,581  (Reporting by Daniel Bases; Editing by Dan Grebler and Andrew Hay)   

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