December 27, 2017 / 7:45 PM / a year ago

Biggest withdrawal in 4 months hits U.S. domestic stock funds -ICI

    By Trevor Hunnicutt
    NEW YORK, Dec 27 (Reuters) - U.S. fund investors walloped
domestic equities with the most selling in four months, using
the proceeds to buy cheaper stocks abroad that could thrive in a
global economic expansion, Investment Company Institute (ICI)
data showed on Wednesday.
    Nearly $9.6 billion tumbled out of funds focused on U.S.
stocks during the week ended Dec. 20, the most in any week since
August, while their counterparts focused outside the country
took in $8 billion in their best showing since June, the trade
group said.
    U.S. President Donald Trump on Friday signed into law the
largest tax overhaul since the 1980s, which slashes the
corporate rate from 35 percent to 21 percent.
    That benefit for corporations has stimulated further gains
for domestic stocks, but investors have been buying abroad
instead, searching for a potentially better value, especially if
growth accelerates in Japan, Europe or emerging markets, too.
    "I'm more optimistic than I have been in several months,"
said Tom Stringfellow, chief investment officer at Frost
Investment Advisors.
    "The emerging markets are not as risky as we anticipated,
Europe is getting traction."
    Money is also typically shifted in the final weeks of the
year in an effort to minimize taxes. Some investors, for
instance, sell securities at a loss to decrease their tax
    "As we shift into a lower-tax regime in 2018, especially for
corporations, we have been observing clients engaging in more
aggressive tax-loss selling before lower tax rates kick in next
year, because tax losses are more valuable in a higher tax
environment," said Scott Minerd, global chief investment officer
at asset manager Guggenheim Partners LLC, in a note distributed
to clients.
    Bond funds pulled in $1.6 billion, the least amount of cash
in five weeks, but still enough to record a 52nd straight week
of inflows and nearly a full year without a single week of
withdrawals, according to ICI. Funds that invest in commodities,
such as gold or oil, posted $434 million in outflows, the most
since July.
    Overall, domestic equity funds are on pace to post outflows
for the third straight year in 2017, according to Thomson
Reuters' Lipper unit, while debt and non-domestic stock funds
are strongly positive on the year.
    Much of the year-end reallocation is benefiting
exchange-traded funds (ETFs), which typically track segments of
the market relatively cheaply. ICI said ETFs took in nearly $11
billion during the week, compared to outflows of nearly $14
billion for mutual funds, which typically charge a higher fee
and attempt to beat the market.
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in million of dollars):
                12/20   12/13   12/6    11/29  11/21/2017
 Equity         -1,594  6,836   8,618   3,133  5,028
    Domestic    -9,563  5,346   5,961   -645   1,166
    World       7,969   1,490   2,657   3,779  3,862
 Hybrid         -2,123  -1,418  -2,139  -652   -500
 Bond           1,604   5,018   6,156   6,537  6,900
    Taxable     1,519   4,947   6,468   6,365  6,162
    Municipal   85      71      -312    171    737
 Commodity      -434    5       421     -295   -39
 Total          -2,548  10,441  13,057  8,723  11,388
 (Reporting by Trevor Hunnicutt; Editing by Tom Brown)
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