After a pause, U.S. fund investors resume rotation from stocks to bonds

Economy

Investors' zest for stock-buying ebbed in the latest week, data from the Investment Company Institute showed on Wednesday, one week after fresh appetite for riskier assets helped U.S.-based funds net the most cash this year.

Including exchange-traded funds, U.S.-based funds invested primarily in domestic shares bled $8.2 billion in the seven-day period through July 20, while bond funds attracted about the same amount. U.S.-based global stock funds were about flat, taking in $16 million, the fund trade group's data showed.

The figure reinforces the rotation this year from equities to bonds but reverses last week's result, when investors stocked up on riskier ETFs and helped U.S.-based funds overall attract the most cash in more than a year. [nL1N1A6124]

This year, investors have pulled an estimated $61 billion from U.S.-based stock mutual funds and ETFs, while pouring $126 billion into bonds, the data shows.

"U.S. equity markets have trended higher in 2016, but mutual-fund investors have been rotating away from these products," said Todd Rosenbluth, director of ETF & mutual-fund research at S&P Global Market Intelligence. "While some of this has gone into ETFs, investors appear to be getting nervous as the bull market ages."

The S&P 500 Total Return Index, which includes dividend payouts, has returned 7.4 percent this year.

In the latest week, nearly $2.8 billion moved into investment-grade bond mutual funds in the United States. Lower-credit, high-yield mutual funds attracted $1 billion, and government bond mutual funds took in $323 million, according to ICI's data.

Corporate bonds have posted strong returns as well, with the widely held iShares iBoxx $ Investment Grade Corporate Bond ETF up 9.7 percent this year.

"Investors continue to take on some credit risk through investment grade corporate bonds and greater risk with high yield bond mutual funds, rather than the lower yielding and safer government bond funds," said Rosenbluth.

The following table shows estimated ICI flows for the past five weeks, excluding ETFs (all figures in millions of dollars):

7/20 7/13 7/6 6/29 6/22/2016

Total equity -12,618 -7,988 -2,880 -5,193 -4,078

-Domestic -10,349 -7,218 -4,315 -2,001 -4,104

-World -2,269 -770 1,435 -3,192 26

Hybrid -779 -1,106 -275 -2,582 -616

Total bond 7,612 6,115 1,276 -2,488 3,267

-Taxable 6,156 4,344 170 -3,664 1,398

-Municipal 1,457 1,771 1,106 1,176 1,869

Total -5,784 -2,979 -1,879 -10,263 -1,428

The following table shows estimated ICI flows, including ETFs (all figures in millions of dollars):

7/20 7/13 7/6 6/29 6/22/2016

Equity -8,142 9,504 531 -10,033 -3,203

-Domestic -8,158 8,837 1,156 -8,041 -4,378

-World 16 667 -625 -1,992 1,175

Hybrid -761 -1,078 -291 -2,485 -547

Bond 8,178 11,491 7,355 -155 4,437

-Taxable 6,491 9,575 5,998 -1,410 2,354

-Municipal 1,687 1,916 1,357 1,255 2,083

Commodity 486 -268 2,158 2,098 689

Total -240 19,649 9,754 -10,575 1,376

Source Reuters