Investors flee US stock ETFs and stick with bonds -Lipper

by on October 26, 2012 2:03 am GMT

Thu Oct 25, 2012 10:03pm EDT

By Sam Forgione
    NEW YORK, Oct 25 (Reuters) - U.S.-based stock funds had
their worst week since early September and lost $4.74 billion as
stock markets took a nosedive while inflows into bond funds were
largely unchanged, data from Thomson Reuters' Lipper service
showed on Thursday.
    The outflows from stock funds in the week ended Oct. 24 were
almost entirely a result of investors fleeing exchange-traded
funds, which surrendered $4.53 billion after outflows of $2.75
billion the previous week. 
    Taxable bond funds had net inflows of $4.43 billion, just
slightly lower than inflows of $4.46 billion the previous week
as investors continued to seek investment-grade corporate bond
funds and government-backed mortgage bond funds.
    The State Street SPDR S&P 500 ETF again accounted for much
of the net outflows from stock funds and gave up $5.53 billion
in investor money.
    Actively managed stock funds saw more money redeemed with
investors pulling $200.6 million. In the prior week, such funds
broke a nine-week downward trend by taking in new money from
    ETFs are generally believed to represent the investment
behavior of institutional investors, while mutual funds are
thought to represent the retail investor.
    "There's been a general consensus that the earnings season
coming out wasn't going to be as robust as previous quarters,"
said Matthew Lemieux, analyst at Lipper.
    "Institutional investors probably saw on the horizon that
there would be some weakness," Lemieux added, with regard to the
ETF outflows.
    The benchmark S&P 500 fell 3.57 percent over the
reporting period as earnings from companies such as Google Inc
, General Electric Co and McDonald's Corp 
disappointed and negative economic data emerged out of France,
Spain and Germany. 
    A bright spot for stock funds was the iShares MSCI Emerging
Markets Index Fund, which pulled in $1.22 billion in new money.
    "That really is one of the only games in town if you're
trying to get exposure to future growth," said Lemieux on the
emerging markets index.
    Investors also put $1.25 billion into flexible funds, which
can invest in a wide range of assets including both stocks and
bonds. The inflows were the most in 11 weeks. 
    Lemieux said that investors could be seeking managers with a
more diversified strategy, while inflows into a series of
target-date funds from Wells Fargo suggested that institutional
investors may have newly offered the funds for employee 401(k)
    Bond funds again won investors' favor with net inflows of
$4.43 billion, slightly lower than inflows of $4.46 billion the
previous week. Bond mutual funds accounted for $3.65 billion of
the new money.
    Investment-grade corporate bond funds attracted $1.9 billion
in inflows, lower than inflows of $2.4 billion the previous week
but still high.
    Investors also continued to target government-guaranteed
mortgage bonds and gave $770 million to funds that hold them.
The Federal Reserve announced on Wednesday that it has not
changed its plan to buy $40 billion in the debt per month to
keep interest rates low and spur a stronger economic recovery.
    Funds that hold safe-haven U.S. Treasuries fared poorly
despite the bearish market sentiment with outflows of $452.52
million, reversing inflows of $265.2 million the previous week.
    Investors may be "feeling that they need to get more bang
for their buck," said Lemieux on the outflows from Treasury
funds, given their low yields.
    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    % Assets  Assets     Count
               ($Bil)                ($Bil)     
 All Equity    -4.736      -0.16     2,833.926  10,058
 Domestic      -8.333      -0.38     2,133.499  7,451
 Non-Domestic  3.597       0.50      700.427    2,607
 All Taxable   4.432       0.30      1,484.510  4,633
 Bond Funds                                     
 All Money     -3.215      -0.14     2,293.450  1,393
 Market Funds                                   
 All           0.666       0.21      316.299    1,338
 Bond Funds