March 4, 2013 / 5:56 PM / 5 years ago

World stock funds start year with record high demand -TrimTabs

NEW YORK, March 4 (Reuters) - Funds that invest in world stocks attracted $55.1 billion in new cash from investors in the first two months of the year, a record sum according to research firm TrimTabs Investment Research.

The funds, which include mutual funds and exchange-traded funds based in the United States that hold world stocks, exceeded the previous two-month record of $49.1 billion at the start of 2006, the research firm said.

Investors worldwide have poured large sums of cash into stock funds so far this year, showing a renewed appetite for risk after seeking the safety and stable returns of bonds in 2012.

Bond funds worldwide attracted $493.5 billion in new money last year, whereas investors redeemed $69.09 billion from stock funds, according to fund-tracking firm EPFR Global.

The record two-month inflow into global equity funds at the start of this year began with a record monthly inflow of $34.4 billion in January, TrimTabs said. Demand fell somewhat in February, but remained high with inflows of $20.7 billion, the firm added.

Global equity funds hold stocks of companies based around the world, including those in the U.S. Demand for global stock funds modestly exceeded inflows into global bond funds, which took in $50.7 billion in the first two months of 2013, according to TrimTabs.

Global equity funds also attracted more new cash than funds that hold only U.S. stocks, which took in $37.9 billion over January and February, the report added.

The greater demand for global stocks came despite the outperformance of U.S. stocks compared to world stocks. The benchmark S&P 500 rose 6.2 percent through February, whereas the MSCI all-country world equity index rose 4.32 percent.

Funds that hold U.S. stocks also delivered stronger returns than funds that hold global stocks. U.S.-focused stock funds earned an average 6.2 percent through February, TrimTabs said. That bested the average performance of 2.4 percent from global equity funds, the report added.

“The U.S. economy, for the typical household, is not very good,” said David Santschi, chief executive officer of TrimTabs. He cited pressure on consumers stemming from higher taxes and gas prices.

“They see the growth prospects being better overseas,” Santschi added with regard to stock markets outside of the U.S.

The big inflows at the start of this year could, however, be a warning to investors that demand has reached its peak, Santschi said.

“When fund flows become extreme, it suggests that the market is topping,” he said.

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