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Banks

U.S.-based stock ETFs rake in cash as Fed raises rates: Lipper

NEW YORK (Reuters) - Investors piled into stock exchange-traded funds at the fastest pace since their record-setting haul following the U.S. presidential election, Lipper said on Thursday, as policymakers raised interest rates.

U.S.-based equity ETFs took in nearly $18 billion in cash in the seven days through Wednesday, while U.S.-based stock mutual funds posted cash withdrawals of $11 billion for the same period, according to Lipper data. Mutual funds are seen to represent retail investors’ moves, while ETFs reflect a range of investors, including institutions such as hedge funds.

The new cash comes as stock markets have taken U.S. President-elect Donald Trump’s campaign promises to bulk up government spending and trim regulations as cause for celebration.

The Dow Jones industrial average has come within striking distance of 20,000 for the first time.

“Stocks are considered to be a play against inflation,” said Tom Roseen, head of research services for Thomson Reuters Lipper, noting that Trump’s polices are hypothetical since he does not take office until January. “The cart’s ahead of the horse.”

The $27 billion that moved into mostly index-tracking stock ETFs after the Nov. 8 election was an all-time record, according to Lipper data, even as actively managed stock mutual funds have come under attack for weak performance and high fees.

Taxable bond mutual funds and ETFs posted $5.8 billion in outflows during the same weekly period, their largest withdrawals since the U.S. presidential election, the data showed.

Rate-sensitive sectors were among the big winners and losers of the week as the Federal Reserve hiked rates Wednesday for the first time in a year.

Real-estate funds posted their largest weekly withdrawals ever, $1.7 billion, according to Lipper records which date to 1992.

High-yield bond funds took in $3.8 billion, their best showing since July. The funds’ hefty yields help cushion the blow from rising rates, while rebounding oil prices have raised hopes for indebted energy firms.

European stock funds took in $66 million in only their fourth week of inflows this year, and their first week in the black since June. The euro dipped and bank stocks rallied after the European Central Bank said it would slow its stimulus program starting in April.

Healthcare sector funds posted $787 million in their largest weekly withdrawals since March. Drug pricing has become a political lightning rod, drawing the attention of Trump and the U.S. Department of Justice, which on Wednesday filed price-fixing charges against two former pharmaceutical executives.

Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan

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