U.S. Markets

Foreign-focused share funds bleed most cash in nearly a year: ICI

NEW YORK (Reuters) - Investors in U.S.-based mutual funds pulled $1.2 billion out of funds that specialize in international shares in the week ended Dec. 9 after a smaller-than-expected stimulus move from the European Central Bank hurt European shares.

The outflows from foreign-focused stock funds were the biggest since the week ended Dec. 22, 2014, according to data released Wednesday from the Investment Company Institute, a U.S. mutual fund trade organization.

The outflows also marked the fourth straight week of withdrawals from the funds. While funds that specialize in U.S. shares posted bigger outflows, at $5.2 billion, those were down from the prior week’s $8 billion in withdrawals.

Overall, stock funds posted $6.4 billion in withdrawals, down from the prior week but marking their seventh straight week of outflows.

Investors also shunned bond funds, pulling $6.5 billion to mark the biggest weekly withdrawals in nearly two and a half months and the fifth straight week of outflows.

All of the outflows were from taxable bond funds, while funds that hold tax-free municipal debt attracted $825 million to mark their 10th straight week of inflows.

Hybrid funds, which can invest in stocks and fixed income securities, posted $2.3 billion in outflows to mark their biggest withdrawals since late August and their eighth straight week of outflows.

The outflows from foreign-focused shares funds came after the ECB cut its deposit rate by the minimum 0.1 percentage point on Dec. 3, disappointing traders who had expected a cut to negative 0.3 percent.

The ECB extended its asset purchase program but did not increase the amount of government bonds it buys each month. The move led top European shares to their biggest fall in four months.

“2015 has seen a steady message of support from the ECB, so this latest move disappointed investors and they may have decided to take some profits,” said Alan Gayle, director of asset allocation at Atlanta-based RidgeWorth Investments, on the outflows from foreign-focused share funds.

He also said increasing concerns about low liquidity among high yield bonds and rising yields on those bonds may have led investors to exit the funds, leading to greater outflows from bond funds overall.

The following table shows estimated ICI flows for the past five weeks (all figures in millions of dollars):

12/9/2015 12/2 11/24 11/18 11/11

Total equity -6,429 -8,867 -3,896 -4,976 -1,249

Domestic -5,213 -7,977 -3,526 -4,539 -2,357

World -1,216 -890 -370 -438 1,108

Hybrid -2,273 -1,251 -1,758 -990 -477

Total bond -6,450 -1,024 -2,768 -2,956 -686

Taxable -7,275 -1,947 -3,394 -3,605 -1,000

Municipal 825 923 626 649 314

Total -15,151 -11,142 -8,422 -8,922 -2,412

Reporting by Sam Forgione