February 28, 2018 / 10:24 PM / a year ago

U.S. fund investors' demand for foreign stocks, bonds diverge -ICI

    By Trevor Hunnicutt
    NEW YORK, Feb 28 (Reuters) - U.S. fund investors are sending
a message that things are different after the market tumble,
putting more cash into international stocks but showing less
tolerance for bonds, Investment Company Institute (ICI) data
showed on Wednesday.
    During the week ended Feb. 21, world stock funds pulled in
$7.4 billion while their domestic counterparts posted
withdrawals of $4.9 billion, according to the trade group. Bonds
took in $4.5 billion.
    That result strengthens the trend of inflows into world
stock funds, but also underscores that debt investors' patience
is getting thin as inflation expectations edge up. The S&P 500
ended February down 3.9 percent, its worst monthly performance
since January 2016.
    World stock funds have pulled in $7.9 billion a week on
average during periods this year, compared with $4.5 billion
during weeks in 2017, a year that passed without a single week
of net withdrawals for the funds.
    On the other hand, the trend of investors flooding into bond
funds has weakened, with the products taking in $2.1 billion a
week over the last four weeks, down from a four-week average of
$4.8 billion the week before and $7.4 billion a week in all of
2017, the data showed.
    "The investor is starting to dust themselves off, and while
we're not running, we are walking this off," said Matthew
Bartolini, head of SPDR Americas research at State Street Global
    "People are going back to areas where there's better
    U.S. mutual funds and exchange-traded funds overall netted
cash for the first time since the early-February pullback during
the latest week, the data showed.    
    The stock market turbulence this month, driven partly by
rising rates, had the effect of driving investors into debt
funds holding longer-term Treasuries with high sensitivity to
rising rates and out of high yield and other bond sectors.
    Bartolini said "the pendulum has swung too far" and that he
expects to see non-government bond funds start pulling in money
"over the next month or so."
    The following table shows estimated ICI flows for mutual
funds and ETFs (all figures in million of dollars):
               2/21    2/14     2/7      1/31    1/24/2018
 Equity        2,505   1,523    -33,974  12,464  23,395
    Domestic   -4,899  -7,556   -37,002  4,532   12,911
    World      7,405   9,079    3,028    7,931   10,483
 Hybrid        -965    -1,456   -1,393   -183    100
 Bond          4,498   -12,114  7,303    8,855   15,110
    Taxable    3,970   -11,474  7,891    7,011   12,657
    Municipal  528     -640     -588     1,845   2,453
 Commodity     477     182      939      386     1,412
 Total         6,515   -11,864  -27,125  21,522  40,017
 (Reporting by Trevor Hunnicutt
Editing by Susan Thomas)
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