January 11, 2017 / 6:53 PM / a year ago

U.S. fund investors, countering trend, favor bonds over stocks - ICI

By Trevor Hunnicutt
    NEW YORK, Jan 11 (Reuters) - Investors injected the most
cash into U.S.-based bond funds and pulled the greatest amount
of money from stock funds since the Nov. 8 U.S. presidential
election during the latest week, Investment Company Institute
data showed on Wednesday.
    U.S.-based bond funds attracted $2.4 billion in the seven
days through Jan. 4, while stock funds posted outflows of $1.6
billion, the trade group said.
    The figures represent a sharp departure from the "risk on"
fund flows that took root after the elections that gave
Republicans control over the U.S. congress and presidency.
    In the weeks since, stock funds have taken in tens of
billions of dollars on the hopes that the new administration's
tax reforms and policies could spark growth. 
    Investors have sold fixed-income funds on the premise that
those policies could ignite bond-harming inflation. Gold funds
and municipal bonds have also seen withdrawals since November.
    "Investors are being more cautious to start 2017," said Todd
Rosenbluth, director of ETF and mutual fund research at CFRA.
"While earnings prospects to start the year are relatively
strong we expect analyst forecasts to come in. That has resulted
in a shift out of U.S. equities and into more conservative
taxable bond funds."
    Corporate bond funds also offer higher yields that
government bond funds. Those payouts can compensate for losses
due to rising rates.
    Other fixed-income funds invest in floating-rate notes that
explicitly pay more interest as rates rise, or "hedged" and "low
duration" products also designed to do better in that
    Investors cashed out $12.6 billion from stock mutual funds
and put $11.1 billion into stock ETFs during the latest week,
ICI data showed. Bond mutual funds and ETFs both attracted money
during the week.
    The following table shows estimated ICI flows, including
ETFs (all figures in millions of dollars):
                 1/4   12/28   12/21   12/14  12/7/2016
 Equity       -1,572   1,314     814  19,856      5,372
 -Domestic    -2,067     639    -363  18,571      2,959
 -World          495     675   1,178   1,286      2,413
 Hybrid       -1,956  -1,092  -2,151  -6,661     -1,423
 Bond          2,424   1,902  -2,513    -971       -174
 -Taxable      4,009   4,642   1,412   2,560      4,208
 -Municipal   -1,585  -2,740  -3,925  -3,531     -4,381
 Commodity      -500    -240    -936    -576     -1,724
 Total        -1,603   1,884  -4,785  11,648      2,052
 (Reporting by Trevor Hunnicutt; Editing by Alan Crosby)
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