NEW YORK (Reuters) - Equity fund investors were net sellers in the holiday-shortened week ended September 5, pulling a net $6.8 billion out of that market, primarily from one exchange-traded fund, data from Thomson Reuters’ Lipper service showed on Thursday.
State Street’s SPDR S&P 500 ETF fund was the culprit behind the net selling, with redemptions totaling just over $6 billion. It represented the worst week for the ETF since mid-December 2011.
Even excluding ETFs, equity funds had net outflows of $901 million. ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor.
“We had the shortened week for the (U.S.) Labor Day holiday and very low volumes. People are coming back facing September, which is historically one of the worst for returns,” said Tom Roseen, head of research services at Lipper.
“It is almost entirely due to the SPY. I don’t think it was people applying the brake so much as simply taking their foot off the gas pedal,” he said.
The outflows occurred during the historically slow end of the northern hemisphere summer when traders and investors are typically away for holidays. During the trading week, the U.S. benchmark Standard & Poor’s 500 stock index slipped 0.50 percent, though the index is around levels not seen since the crescendo of the U.S. market crisis four years ago.
Two-thirds of the way through the third quarter, however, the S&P 500 index is up 5.12 percent, including Thursday’s rally on the back of the new European bond-buying program announced by the European Central Bank aimed at stemming the region’s debt crisis.
“The ECB’s decision does make it a little bit better today, but people are still holding their breath ahead of the employment numbers tomorrow and the Fed next week,” Roseen said. The Federal Reserve’s policy-setting committee meets next week.
Investors are looking for confirmation of recent upbeat employment data from both the private and public sectors.
Washington releases the August employment report on Friday, which economists think will show only modest hiring, with nonfarm payrolls expected to rise 125,000. The unemployment rate is seen holding at 8.3 percent.
The trepidation over economic growth prospects and low inflation remains the driving factors for fixed income fund investors. While paltry, net buying of $374 million worth of taxable bond funds extended the inflow streak to nine weeks.
Money market funds pulled in just over $700 million in fresh capital while municipal bond funds had $260 million in net inflows.
But the freed-up money that left equities did not really go into U.S. Treasuries. Funds that purchase U.S. Treasuries had net outflows of just over $1 billion for the reporting week.
Reaching for yield, investors maintained some modicum of interest in corporate high-yield funds, putting $200 million to work in that sector while investment grade corporate bond funds pulled in a net $616 million.
In recent weeks, the prospect of the Fed launching another round of monetary stimulus has sparked more interest in gold.
Funds focused on gold and natural resources pulled in a net $518 million, while the State Street SPDR Gold Fund had net inflows of $196 million, extending its streak of fresh capital to five weeks.
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 Chg ($Bil) % Assets Assets ($Bil) Count All Equity Funds -6.803 -0.24 2,784.233 10,065 Domestic Equities -6.615 -0.31 2,123.130 7,478 Non-Domestic Equities -0.187 -0.03 661.103 2,587 All Taxable Bond Funds 0.374 0.03 1,441.202 4,641 All Money Market Funds 0.704 0.03 2,292.470 1,416 All Municipal Bond Funds 0.260 0.08 309.274 1,335
Editing by Leslie Adler