December 9, 2016 / 12:22 AM / 8 months ago

UPDATE 1-Investors choose cash over U.S.-based stock and bond funds

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(Adds data on mutual funds and ETFs, context, analyst quote,
table, byline)
    By Trevor Hunnicutt
    NEW YORK, Dec 8 (Reuters) - Investors cast a wary eye on
markets in the latest week, rerouting $14.7 billion to cash-like
investments in the largest weekly inflow in a month, Lipper data
for U.S.-based funds showed on Thursday.
    The fourth straight inflow into low-risk money-market funds,
during the seven days through Dec. 7, comes even as stock
indexes soared to new highs after the November U.S. presidential
election.
    That rally has done little to convince investors to buy
stock mutual funds.
    Investors pulled $9.9 billion from those products in the
latest week, while stock ETFs attracted $8 billion.
    "Equity mutual funds have been suffering outflows through
the whole post-election rally," said Thomson Reuters Lipper
research analyst Pat Keon. "This week, it actually took a bit of
a nosedive."
    The result deflates a report Wednesday by the Investment
Company Institute trade group that showed equity mutual funds
recorded a moderate inflow during the eight days through Nov.
30. 
    The mutual funds are closing out their worst year of sales 
since the financial crisis in 2008, ICI data showed, as funds
with active managers notched lackluster performance against
relatively low-cost index funds and ETFs that track the market.
    
    GREAT ROTATION DELAYED
    The projections of growth under a new presidential
administration have lifted stocks but sparked fears of
bond-harming inflation, and of a "great rotation" from bonds to
stocks.
    The U.S. Federal Reserve is also widely expected to hike
rates after a policy meeting next week, a move that could hurt
bond prices. 
    But taxable-bond funds showed resilience, breaking a
five-week streak of outflows and attracting $1.1 billion, Lipper
said.
    Loan-participation funds, which hike payouts as rates
increase, took in $1.8 billion and the most cash since 2013.
High-yield bond funds attracted $2 billion and investment-grade
bond funds raised $2.6 billion during the week. The corporate
bonds pay higher yields that can compensate for losses as rates
rise.
    Municipal bond funds continued to be ransacked, posting $2.2
billion in outflows, the data showed.
    International debt funds posted $1 billion in outflows,
marking the category's worst withdrawals since June 2013, as
investors worried whether emerging markets can repay debts in
increasingly pricey U.S. dollars.
    Investors funneled $997 million and the most money in a year
to energy sector funds after top oil producers agreed to cut
output in a bid to support prices. 
    Healthcare funds posted $408 million in withdrawals, the
largest outflows since October, as Trump's comments on
prescription-drug pricing wounded the sector. 
    The following table shows estimated ICI flows, including
ETFs (all figures in millions of dollars):
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          -1.987    -0.04     5,456.723  11,875
 Domestic Equities         -1.687    -0.04     3,929.629  8,487
 Non-Domestic Equities     -0.300    -0.02     1,527.094  3,388
 All Taxable Bond Funds    1.116     0.05      2,316.628  5,999
 All Money Market Funds    14.695    0.62      2,396.239  1,017
 All Municipal Bond Funds  -2.214    -0.60     368.430    1,406
 
 (Reporting by Trevor Hunnicutt; Editing by Jennifer Ablan and
Bernard Orr)

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