Investors exit stock ETFs and favor high-quality bonds -Lipper

by on October 18, 2012 11:56 pm GMT

Thu Oct 18, 2012 7:56pm EDT

By Sam Forgione
    NEW YORK, Oct 18 (Reuters) - U.S.-domiciled equity funds had
outflows of $2.55 billion in the week ended Oct. 17, with most
of the losses stemming from an exchange-traded fund that tracks
the benchmark S&P 500, data from Thomson Reuters' Lipper service
showed on Thursday.
    The State Street SPDR S&P 500 ETF bled $2.1 billion in
outflows, while ETFs overall posted net outflows of $2.75
    Stock mutual funds, meanwhile, had net inflows of $196
million over the reporting period, which were modest but still
the first new cash into the funds in ten weeks.
    ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent retail investors.
    The $2.55 billion in outflows from equity mutual funds and
ETFs combined is a reversal from the previous week's net inflows
of $1 billion, when strong inflows of $2.1 billion into ETFs
overshadowed outflows of $1.1 billion from stock mutual funds. 
    "Some of it is investors just taking a breather," said Tom
Roseen, head of research services at Lipper, who cited concerns
over the U.S. presidential election, weak corporate earnings for
technology companies, and uncertainty over Spain's debt burden.
    Still, the S&P 500 rose roughly 2 percent during the
reporting period while demand for safe-haven U.S. Treasuries
fell after corporate earnings picked up and rating agency
Moody's affirmed an investment-grade sovereign rating on Spain.
    Unlike their stock counterparts, taxable bond funds had net
inflows of $4.46 billion, with $3.35 billion invested in mutual
funds and the remainder in bond ETFs. The $4.46 billion in new
cash is the highest weekly net inflow so far this month.
    Investors put $2.4 billion into investment-grade corporate
bond funds, the most on a record that spans nearly 21 years. Of
that sum, $1.41 billion went into investment-grade corporate
bond mutual funds, and the rest was put into ETFs.
    Investors showed some appetite for risk in flexible income
funds, which can invest in a wide range of securities across the
risk spectrum. The funds had inflows of $606 million.
    "People were willing to step up on the risk spectrum a
little bit and go for the higher yields," said Roseen, who added
that the ZEW Institute's monthly survey showing
better-than-expected improvement in German investor confidence
and a rise in retail sales in September were reassuring.
    Government-guaranteed mortgage bond funds, which hold the
same assets that the U.S. Federal Reserve has targeted for
purchases of $40 billion per month under its stimulus plan,
continued to gain inflows and attracted $654 million. 
    The weekly Lipper fund flow data is compiled from reports
issued by U.S.-domiciled mutual funds and exchange-traded funds.
    The following is a broad breakdown of the flows for the
week, including exchange-traded funds (in $ billions): 
 Sector          Flow Chg ($Bil)  % Assets  Assets       Count

 All Equity      -2.551           -0.09     2,924.688    10,077
 Domestic        -3.648           -0.17     2,211.644    7,464
 Non-Domestic    1.097            0.16      713.044      2,613
 All Taxable     4.459            0.30      1,480.857    4,633
 Bond Funds                                              
 All Money       10.583           0.46      2,298.221    1,398
 Market Funds                                            
 All Municipal   0.621            0.20      315.116      1,339
 Bond Funds