November 16, 2018 / 12:06 AM / a month ago

UPDATE 1-Investors pull record $53 bln from U.S. taxable funds in October -Lipper

 (Adds details on funds, quote, table, byline)
    By Trevor Hunnicutt
    NEW YORK, Nov 15 (Reuters) - U.S. fund investors are
maintaining a wary position when it comes to bonds, pulling more
cash after record withdrawals in October, Lipper data showed on
Thursday.
    Taxable bond mutual funds and exchange-traded funds (ETFs)
based in the United States posted $1.2 billion in withdrawals
during the week ended Nov. 14, Lipper said. Investors pulled
$131 million from municipal bond funds in the eighth straight
week of withdrawals for those products.
    In October, more than $53 billion tumbled out of U.S.-based
taxable bond funds, the largest withdrawals on records dating to
1992, according to Lipper. October marked only the 12th time
since the March 2009 dawn of the U.S. bull market that stocks
and bonds fell in tandem.  
    DoubleLine Capital LP portfolio manager Monica Erickson on
Thursday told the Reuters Global Investment 2019 Outlook Summit
that the withdrawals could continue as investors respond poorly
to poor returns, particularly in investment-grade bonds widely
held by retail investors as a source of stability.
    "Investors open their statements and they look at their
statements and they see that it's negative," said Erickson.
    On other the end of the credit spectrum, low-risk money
market funds, where investors park cash, took in $12.4 billion,
marking a fourth straight week netting new money.
    Debt-buying fund managers have struggled to keep investors
happy as losses start to pile up from rising rates that erode
bond prices. 
    The Federal Reserve has raised interest rates three times
this year, to a range of 2 percent and 2.25 percent, and the
central bank is expected to raise rates another quarter
percentage point in December.
    Erickson said the Fed risks tightening monetary policy too
much.
    Also hurting demand for bonds during the week was a rebound
in interest in risk-taking in the stock market. Relatively
low-risk Treasury funds posted $1.1 billion in withdrawals,
while stock funds took in $2.7 billion.
    Rate-sensitive utilities sector funds pulled in $775
million, the most since December 2014. And healthcare funds
pulled in $1.7 billion, the most since the aftermath of the
November 2016 U.S. presidential election.
    Some investors see gridlock after congressional elections
this month that left the two houses of U.S. Congress split
between Democrats and Republicans as helping to tamp down
potential action to lower drug prices.    
    The following is a breakdown of the flows for the week,
including mutual funds and ETFs:
    
 Sector                    Flow Chg  Pct of    Assets     Count
                           ($ blns)  Assets    ($ blns)   
 All Equity Funds          2.656     0.04      6,971.763  12,226
 Domestic Equities         2.166     0.04      4,979.827  8,674
 Non-Domestic Equities     0.490     0.02      1,991.936  3,552
 All Taxable Bond Funds    -1.243    -0.04     2,765.325  6,032
 All Money Market Funds    12.409    0.45      2,793.690  1,038
 All Municipal Bond Funds  -0.131    -0.03     421.202    1,441
 
 (Reporting by Trevor Hunnicutt; editing by Leslie Adler,
Jennifer Ablan and Tom Brown)
  
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