By Trevor Hunnicutt
NEW YORK, March 1 Fund investors' aversion to
riding the market's highs showed signs of waning as stock mutual
funds attracted the most cash in a year in the latest week,
Investment Company Institute data showed on Wednesday.
U.S.-based stock mutual funds took in $2.4 billion during
the week ended Feb. 22, their best result in 52 weeks, the trade
group's data showed.
Including exchange-traded funds, equity funds gathered $6.9
billion, a fourth straight week of inflows, split about evenly
between domestic and world equities. International stock funds
attracted a 12th straight week of cash.
"Investors continue to put fresh money to work using both
ETFs and even mutual funds, not wanting to miss out on the
rally," said Todd Rosenbluth, head of mutual fund and ETF
research at CFRA Research.
Wall Street indexes rallied on Wednesday, with the Dow Jones
Industrial Average hitting a record above 21,000 points,
while the dollar and U.S. Treasury yields jumped as investors
bet a U.S. interest rate hike would come soon. U.S. Federal
Reserve officials have signaled they will seriously consider
whether raise rates at their next meeting, on March 14-15.
A three-week average of overall flows into mutual funds and
ETFs - including stocks, bonds and commodities - is now running
at its highest level since late 2014.
Fund investors' desire to put more money into the equity
market as it gains value is inconsistent with recent behavior.
Last year, for instance, investors pulled $72 billion from stock
funds as the MSCI ACWI, a gauge of 46 countries'
stocks, gained 8.5 percent. Bond funds took in $190 billion in
2016, according to ICI.
Equity mutual funds, heavily used by retail investors, have
been particularly hurt as investors moved cash from
stock-picking fund managers to ETFs, which often track an index
rather than aiming to beat it.
Demand for fixed income continues. During the latest week,
bond funds gathered $6.8 billion, including $4.6 billion into
mutual funds, even with the potential for a rate hike. Inflows
into taxable bond funds continued for the 12th straight week.
Rosenbluth said investors are focused on buying bonds
offering relatively high yields, which can help soothe losses
that come with rising rates.
The following table shows estimated ICI flows, including
mutual funds and exchange-traded funds (all figures in millions
2/22 2/15 2/8 2/1 1/25/2017
Equity 6,934 13,314 5,492 15,045 -3,934
-Domestic 3,439 8,059 814 11,769 -8,249
-World 3,495 5,255 4,678 3,276 4,315
Hybrid -26 -52 155 -567 -549
Bond 6,799 8,594 11,615 9,388 8,158
-Taxable 6,585 7,977 10,705 8,511 7,637
-Municipal 214 616 911 877 521
Commodity 35 327 1,061 413 -492
Total 13,742 22,182 18,323 24,279 3,185
(Reporting by Trevor Hunnicutt; Editing by Leslie Adler)