January 5, 2018 / 12:45 AM / 3 months ago

UPDATE 1-Rising tide in U.S. markets helps bonds, global stocks

 (Adds details on funds, analyst quote, table, byline)
    By Trevor Hunnicutt
    NEW YORK, Jan 4 (Reuters) - Investors sitting on U.S. stock
returns need a place to put the money, and the big winners are
international markets and high-rated debt issuers from
corporations to governments.
    U.S. fund investors pulled $8.4 billion from stocks and
funneled $3.3 billion into taxable bonds during the most recent
week, responding defensively to a strong year of market gains,
Lipper data showed on Thursday.
    It is a continuation of a theme that dominated in 2017:
Investors raided strong-performing domestic stock funds and put
the money elsewhere. But the trend is a break from the axiomatic
truth that flows chase performance.
    Domestic equity funds posted outflows of $27.3 billion in
2017, according to preliminary year-end data from Lipper,
marking a third year of outflows for the category.
    "It was a phenomenal year as far as returns go," said Tom
Roseen, head of research services for Thomson Reuters' Lipper
unit. He said the average equity fund was up more than 20
percent for the year, adding, "But what we saw was a mass exodus
from retail."
    Non-domestic equity fund inflows of $171.4 billion and
Treasury fund inflows of $34 billion for the year are the
largest on records dating to 1992. Emerging market inflows were
the biggest since 2010, Lipper's preliminary data showed.
    That cash from U.S. investors is helping keep bond yields
and borrowing costs low worldwide.
    Yet the domestic equity outflows are not universal.
    Exchange-traded funds (ETFs), many of which track an index
and charge lower fees than funds run by stockpickers trying to
beat the market, had another record year of inflows.
    Technology-focused equity funds pulled in about $13 billion
for the year, the most since the sector's boom year in 2000,
when they pulled in $41 billion, before the sector tanked.
    High-yield bonds, made up of the riskiest corporate debt,
have been an exception to the festive atmosphere in bonds,
posting $21 billion outflows for the year, the largest since
    The following is a breakdown of the flows for the latest
week, through Jan. 3, including mutual funds and ETFs:
 Sector                    Flow Chg  % Assets  Assets     Count
                           ($blns)             ($blns)    
 All Equity Funds          -8.397    -0.12     6,857.277  12,131
 -Domestic Equities        -10.797   -0.23     4,692.258  8,653
 -Non-Domestic Equities    2.400     0.11      2,165.019  3,478
 All Taxable Bond Funds    3.279     0.13      2,632.191  6,041
 All Money Market Funds    -7.094    -0.26     2,686.100  1,034
 All Municipal Bond Funds  -0.048    -0.01     402.705    1,474
 (Reporting by Trevor Hunnicutt; Editing by Lisa Shumaker and
Leslie Adler)
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