January 17, 2019 / 11:17 PM / 6 months ago

UPDATE 1-U.S. fund investors put most cash in 'junk' since late 2016 -Lipper

 (Adds quotes, details on investment flows, byline)
    By Trevor Hunnicutt
    NEW YORK, Jan 17 (Reuters) - U.S. fund investors charged
into high-yield "junk" bonds during the latest week, pouring in
$3.3 billion, the most cash flowing into that market since late
2016, Lipper said on Thursday, boosted by soothing words by
Federal Reserve Chairman Jerome Powell.
    Underscoring investors' appetite for some risk-taking,
investors pulled $15 billion net cash from U.S.-based money
market funds, according to the Refinitiv research service. For
their part, U.S.-based equity mutual funds - which exclude
exchange-traded funds - posted inflows of $4.8 billion, Lipper
data showed. 
    "From this week’s results, it appears that fund investors
are encouraged by what they’ve seen and heard from the equity
markets, the Fed and economic data, and are willing to take on
more risk," said Pat Keon, senior research analyst at Lipper.
    Last week, Powell reiterated that the Fed plans to evaluate
the health of the economy before moving ahead with any new
interest rate increases.
    The $15 billion net outflow from money markets "indicates
that investors are taking money off the sidelines and putting it
back to work as well as the net inflows into below investment-
grade debt funds - high-yield funds and high-yield muni funds,"
Keon said.
    "The outflows from Loan Participation funds are a long-term
trend starting in the early part of Q3," Keon said. The peer
group has been hurt by the Fed's slowing its pace of rate hikes,
as bank loans are floating rates.
    "It’s possible the sector was overbought as well as prior to
the downturn at the start of Q4, they had net inflows in 34 of
the previous 35 weeks," Keon said.
    Energy sector stock funds recorded $1.3 billion in outflows
in the same week, the largest withdrawals since October 2014,
even as oil prices edged off the 1-1/2-year lows hit last month.
    The cash withdrawals for energy sector funds were
concentrated mostly in two ETFs - SPDR S&P Oil & Gas,
with $641 million of net cash outflows, and Energy Select Sector
SPDR, with $576 million of net cash outflows, Keon
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
 Sector              Flow Chg      % Assets  Assets      Count
                     ($Bil)                  ($Bil)      
 All Equity Funds    -4.377        -0.07     6,777.863   12,161
 Domestic Equities   -5.910        -0.12     4,808.886   8,639
 Non-Domestic        1.534         0.08      1,968.977   3,522
 All Taxable Bond    4.323         0.16      2,743.797   5,990
 All Money Market    -15.046       -0.51     2,919.119   1,004
 All Municipal Bond  0.946         0.22      431.107     1,413
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Leslie Adler)
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