By Trevor Hunnicutt
NEW YORK, Oct 12 Investors turned away from risk
in the stock market, snatching the most cash from U.S.-based
equity funds in five months during the latest week, Investment
Company Institute data showed on Wednesday.
The withdrawals came as investors tried to stomach fears
over Brexit, the stability of Deutsche Bank AG and
the timing of the next U.S. interest rate hike.
The stock mutual funds and exchange-traded funds (ETFs)
recorded $11.8 billion in outflows during the seven days through
Oct. 5, the trade group said, an elevated figure even by the
standards of a year that has seen a consistent flight to the
perceived safety of bonds.
In May, investors pulled $13.4 billion from the funds as
global growth fears abounded, the only other week this year with
higher withdrawals, even including the period when Britain voted
to quit the European Union, the data showed.
Speeches by U.S. Federal Reserve officials during the period
measured by ICI seemed to hint at a U.S. rate hike sooner rather
than later, while UK Prime Minister Theresa May was seen
pointing to a bumpy process to take Britain out of the European
Union starting by March 2017.
Meanwhile, Germany's largest bank is fighting questions over
its stability as it faces a potential multibillion-dollar fine
from the U.S. Department of Justice.
"Investors are scared that we'll have a repeat of what
happened last December and January after they (the Fed)
increased interest rates," said Chuck Self, chief investment
officer at iSectors LLC, whose portfolios cut stocks in favor of
bonds this summer.
In December 2015, the Federal Reserve raised interest rates
for the first time in nearly a decade. The S&P 500
benchmark fell about 12 percent over the nearly two months that
In the latest week, three-quarters of the stock fund
outflows struck in funds focused on domestic shares, ICI data
showed, reversing the prior week's inflows.
Self said investors sometimes take short-term positions in
assets that have done well, as stocks had in the third quarter,
before reporting periodic results and holdings to clients. Then
they will often sell those positions, showing "how they truly
feel" about the potential for future gains, he said.
By contrast, bond funds took in $9.1 billion in their 14th
week of inflows and biggest haul since August, ICI said, even as
Thomson Reuters Lipper data showed the average bond fund saw
The following table shows estimated ICI flows, including
ETFs (all figures in millions of dollars):
10/5 9/28 9/21 9/14 9/7/16
Equity -11,821 4,227 -4,387 -2,750 -2,670
-Domestic -8,841 7,870 -2,903 -3,401 -2,060
-World -2,980 -3,643 -1,484 651 -610
Hybrid -1,539 -507 -541 -1,545 -873
Bond 9,124 7,776 6,474 996 6,744
-Taxable 8,192 6,659 5,594 196 5,504
-Municipal 933 1,118 880 800 1,240
Commodity -105 325 533 -898 458
Total -4,341 11,822 2,079 -4,198 3,660
(Reporting by Trevor Hunnicutt; Editing by Bill Trott)