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UPDATE 1-Mutual fund investors sour on stocks, bonds in latest week-Lipper
June 29, 2017 / 11:10 PM / 3 months ago

UPDATE 1-Mutual fund investors sour on stocks, bonds in latest week-Lipper

 (Adds details on mutual funds and ETFs, analyst quote, byline,
table)
    By Trevor Hunnicutt
    NEW YORK, June 29 (Reuters) - U.S. mutual fund investors
dumped stocks and bonds during the latest week, delivering both
categories their worst respective outflows of the year, Thomson
Reuters' Lipper data showed on Thursday.
    The $6.7 billion pullback from taxable bond mutual funds
marks a change of heart after the funds heavily used by retail
investors inhaled tens of billions in bonds since last year.
    The U.S. Federal Reserve is on a path to raising interest
rates from very low levels even as economic data has remained
mixed. Rising rates are seen as a drag on bond fund returns.

    Meanwhile monetary policy officials, including European
Central Bank President Mario Draghi, made comments this week
implying a global turn away from ultra-easy stimulus policies.
 Yields on the 10-year Treasury benchmark leapt from
2.14 on Monday to 2.27 on Thursday.
    Riskier high-yield bond mutual funds and ETFs posted $1.7
billion in withdrawals, their worst outflows since March, the
data showed.
    "I wouldn't be surprised if it becomes more consistent than
we've seen in the past - money leaving taxable-bond funds," said
Pat Keon, Senior Research Analyst at Lipper.
    "It's just a question of where does it go because equity
funds are distasteful for a lot of people."
    Mutual fund investors cashed out a net $7.3 billion from
domestic stocks. ETF investors pulled an additional $4.2 billion
from funds focused on U.S. company shares, adding to the equity
market's woes. 
    The S&P 500 has managed a 0.5 percent gain this month
despite a dramatic selloff for oil and some of the year's most
high-flying technology stocks.
    Investors had bid up high earning growth stocks in hopes
that they would continue to eek out gains in a tepid U.S.
economy that is still supported by the easy monetary policy that
has been in place nearly a decade after the 2007-2009 global
financial crisis.
    Meanwhile, foreign stocks continue to find favor among U.S.
investors. Japanese equity funds pulled in half a billion
dollars during the latest week, their largest haul since
February.
    Within U.S. stocks, violent rotations between sectors
continue.
    Finance sector funds posted $1.2 billion in outflows, the
most since March, even as the Fed approved large banks' plans to
use extra capital for stock buybacks, dividends and other
purposes beyond being a cushion against catastrophe.

    Healthcare funds pulled in $1.7 billion and the most cash
since November 2016 as Congress aimed to pass an Obamacare
replacement bill.
    Rate-sensitive real estate and utilities sectors posted
their largest withdrawals of the year.
    The following is a breakdown of the flows for the week,
including mutual funds and exchange-traded funds:
    
 Sector                    Flow Chg   Pct of    Assets    Count
                           ($ blns)   Assets   ($ blns)   
 All Equity Funds          -9.694    -0.16     6,002.588  11,474
 Domestic Equities         -11.579   -0.28     4,178.195  8,213
 Non-Domestic Equities     1.886     0.10      1,824.394  3,261
 All Taxable Bond Funds    -5.464    -0.22     2,428.890  5,784
 All Money Market Funds    5.307     0.21      2,481.240  1,099
 All Municipal Bond Funds  0.496     0.13      387.939    1,391
  

 (Reporting by Trevor Hunnicutt; Editing by Daniel Bases and
Diane Craft)
  

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