July 15, 2014 / 9:56 PM / 3 years ago

U.S. stock funds post $8.3 bln outflows in June - Morningstar

NEW YORK, July 15 (Reuters) - Investors in U.S.-based mutual funds pulled $8.3 billion out of funds that specialize in U.S. stocks in June on concerns that U.S. shares had little upside at record levels, Morningstar data showed on Tuesday.

The outflows were the biggest in 18 months and marked the second straight month of withdrawals, data from the Chicago-based Morningstar showed. Taxable bond funds attracted the most new cash in June at $10.5 billion, while international equity funds followed with inflows of $9.6 billion.

Funds that hold international stocks have attracted $67.5 billion in new cash this year through June, marking the biggest inflows among all asset classes, according to Morningstar. Taxable bond funds have attracted the second-biggest inflows of $59.2 billion.

The outflows from funds that specialize in U.S. stocks underscore investors’ reduced confidence in U.S. stocks, a view that intensified after the Commerce Department said June 25 that U.S. gross domestic product fell at a 2.9 percent annual rate in the first quarter, the sharpest decline in five years.

“The U.S. equity market appears pretty fully valued,” said Michael Rawson, fund analyst at Morningstar. The benchmark S&P 500 stock index rose nearly 30 percent last year and is up about 7 percent this year. He added that “it feels like the U.S. economy is still in a recession.”

International stocks in Europe and Japan, meanwhile, are more attractive to investors since their central banks are pushing ahead with monetary stimulus programs while the U.S. Federal Reserve is on a path toward tightening its stimulus, said Rawson.

Funds that specialize in large-cap U.S growth stocks posted the biggest outflows of $4 billion. Among all U.S.-focused stock funds, the Fidelity Advisors Equity Growth Fund posted the biggest outflows of $1 billion, but were a result of the firm moving cash to another fund, said Rawson. The GMO Quality Fund posted the second-biggest outflows of $732 million.

The inflows into bond funds showed that investors are less worried about rising rates and falling prices, said Rawson. In addition, the Barclays U.S. Aggregate Bond Index has risen 3.7 percent this year through Monday.

Not all bond funds raked in new cash. The $225-billion Pimco Total Return Fund, the world’s largest bond fund run by Bill Gross, had the biggest outflows among all U.S. mutual funds of $4.5 billion, while the firm’s $13-billion Pimco High Yield Fund posted the second-largest outflows of $1.4 billion.

Pacific Investment Management Co, which had $1.97 trillion in assets at the end of June according to the firm’s website, posted $5.8 billion in withdrawals in June, the Morningstar data showed. (Reporting by Sam Forgione; Editing by Bernard Orr)

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