December 21, 2017 / 11:14 PM / 5 months ago

U.S.-based equity funds post $22 billion of outflows, largest withdrawals in 2017

NEW YORK (Reuters) - U.S.-based equity funds posted $22.2 billion of outflows in the week ended Dec. 20, the largest cash withdrawals for 2017, according to Lipper data on Thursday.

U.S.-based equity mutual funds posted $12.2 billion of outflows in the week ended Wednesday, extending weekly cash withdrawals for most of 2017. And U.S.-based stock ETFs posted $10 billion of outflows in the week ended Dec. 20, the largest cash withdrawals in 2017, Lipper said.

Investors’ risk aversion spread to bonds. U.S.-based high-yield “junk” bond funds posted $1.1 billion of outflows in the week ended Dec. 20, the group’s second consecutive week of cash withdrawals, according to Lipper.

“Money leaving high-yield bonds and equity funds - as well as going to investment-grade corporates - are risk-off strategies,” said Pat Keon, Thomson Reuters Lipper’s senior research analyst. “Also, both groups have struggled all year – equity mutual funds net outflows of negative $141 billion, high-yield bond funds at negative $22.1 billion.”

U.S.-based investment-grade corporate bond funds attracted $1.14 billion of inflows in the week ended Dec. 20, extending the group’s weekly inflow streak since late September, Lipper said.

Equity ETFs stole the spotlight, however. Equity will have record net inflows of $265 billion this year and “this current week’s net outflow broke a streak of 10 straight inflows,” Keon said.

“While it is a high number, unless a multiple-week trend takes hold, I would not find it too concerning,” Keon said.

“Despite the run-up in the Dow and the good economic numbers we’re seeing lately, we don’t always see it reflected in net inflows for funds. We speculate that fund investors appear to be overly cautious waiting for a market correction and/or a geopolitical or internal political crisis to worsen.”

U.S.-based money market funds posted $21.2 billion of outflows in the week ended Dec. 20, following six weeks of inflows, Lipper data showed.

Reporting by Jennifer Ablan; Editing by James Dalgleish

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