August 25, 2017 / 12:10 AM / in a year

UPDATE 1-Cash is king for U.S. fund investors wary of stocks

 (Adds details on mutual funds and ETFs, analyst quote, table,
reporting credits)
    By Trevor Hunnicutt
    NEW YORK, Aug 24 (Reuters) - Investors socked savings away
and opted against loading up on U.S. stocks during the latest
week, Lipper data for U.S.-based funds showed on Thursday.
    Money market funds, designed to hold their cash value even
when markets falter, attracted $24.6 billion during the week
ended Aug 23. The products are on pace for their largest monthly
inflows since December 2012, having drawn $69 billion already
during August, Lipper said.
    Stock mutual fund and exchange-traded fund withdrawals were
$3.4 billion, according to the weekly data.
    Investors' risk-averse shift came as the S&P 500 was
hit by a 1.5 percent selloff last Thursday, the kind of setback
that has grown increasingly rare as U.S. stocks prepare to claim
a ninth straight year of positive total returns.
    Investors are wary of whether tax reform and other promised
U.S. government policies will come to fruition and lift markets
further, said Pat Keon, senior research analyst for Thomson
Reuters' Lipper unit. A late-September deadline also loomed for
U.S. officials to raise the amount of money the government can
borrow, or risk default.
    "People are taking money out of play," said Keon, "waiting
to see what happens before they invest."
    Meanwhile, once-popular bets on rising rates and inflation
are fading as monetary policymakers convene for a summit in
    Central bankers have kept developed economies' interest
rates near historic lows to stoke growth, and inflation has
fallen short of levels that would push them to make a drastic
change. Rising inflation and rates hurt a bond's value.
    Yet funds invested in certain types of bonds that gird
against rising prices posted $300 million in outflows during the
week, the most withdrawn since June 2016.
    Loan participation funds, invested in debt that actually
yields more when rates rise, recorded $377 million in weekly
outflows, also their largest withdrawals in about 14 months.
    Fund flows show more confidence in high-rated bonds and
international stocks than in domestic stocks.
    Non-domestic equity funds, which attracted $996 million in
the latest week, have recorded outflows just four weeks this
year, according to Lipper. Investment-grade debt funds have not
seen a single week of outflows in 2017, pulling in $3.3 billion
during the latest seven-day period.
    By contrast, domestic stock funds posted $4.4 billion in
weekly withdrawals. Technology sector funds posted $427 million
in outflows, their first withdrawals in seven weeks. High-yield
bond funds recorded $1 billion in outflows, Lipper said.
    The following is a breakdown of the flows for the week,
including mutual funds and exchange-traded funds:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          -3.433    -0.06     6,085.443  11,444
 Domestic Equities         -4.430    -0.11     4,167.287  8,165
 Non-Domestic Equities     0.996     0.05      1,918.156  3,279
 All Taxable Bond Funds    0.643     0.03      2,499.481  5,773
 All Money Market Funds    24.630    0.96      2,583.838  1,089
 All Municipal Bond Funds  -0.636    -0.16     393.408    1,395
 (Reporting by Trevor Hunnicutt; Additional reporting by
Kimberly Chin; Editing by James Dalgleish and Andrew Hay)
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