Investors pull most money from U.S. stock mutual funds this year: ICI

Reuters

Published May 04, 2016 11:30AM ET

Updated May 04, 2016 11:40AM ET

Investors pull most money from U.S. stock mutual funds this year: ICI

By Trevor Hunnicutt

NEW YORK (Reuters) - Mutual fund investors punished U.S.-based stock funds with their seventh consecutive week of withdrawals and their largest outflows so far this year, Investment Company Institute (ICI) data showed on Wednesday.

Stock funds based in the United States returned $7.9 billion in cash to investors, adding to a near-two-month streak that has swept nearly $32 billion from the funds. That is the largest weekly withdrawal for those funds since investors pulled $8.3 billion in December, according to ICI data through the week ended April 27.

The funds' poor result comes despite a rebound in U.S. stock prices. The benchmark S&P 500 (SPXTR) is up 13 percent from its February low. Yet fund investors have been less impressed with economic growth prospects following meek first-quarter corporate earnings.

"Though first-quarter earnings season has been moderately better than expected," projections for the year are flat, said Todd Rosenbluth, director of ETF & mutual fund research for S&P Global Market Intelligence. "This is a drag of demand for U.S. equity strategies."

Investors pulled $5.5 billion from U.S.-based funds focused on domestic companies and another $2.4 billion from international stock funds, the data showed.

Including exchange-traded funds, the outflows to U.S.-based equity funds were a more moderate $3 billion, ICI said.

"Investors have been rotating toward equity ETFs and away from equity mutual funds for a longer period of time, as investors favor a lower cost alternative," said Rosenbluth.

Investment-grade bond funds attracted $3.1 billion, their ninth week in a row drawing new money. Riskier high-yield funds added $924 million. Overall, bond funds absorbed $8.3 billion in new cash, according to ICI, a fund trade group.

"The Federal Reserve's citing of disappointing economic data in its recent decision to hold off raising fed funds rate, investors have been focusing on the safety of investment-grade bond funds," Rosenbluth said.