U.S. equity funds saw sharp outflows last week

FEB 14, 2014
Investors fled U.S. equity mutual funds last week on the heels of weak economic data Mutual funds as a whole saw weak inflows, attracting only $411 million for the seven-day period ended last Wednesday, according to data from the Investment Company Institute. Declines was most pronounced among U.S. equity funds, which saw outflows of $1.56 billion. “These outflows were definitely due to market volatility,” said Barry Fennell, a senior research analyst at Lipper Corp. “The market was down more than 300 points on Monday of last week.” The outflows were even more dramatic among ETFs, Mr. Fennell said. More than $22 billion left equity ETFs last week. Investors should expect this trend to reverse in the coming week, Mr. Fennell said. Starting last Thursday, the Dow saw the largest consecutive four-day rise in more than a year. Fourth-quarter earnings were strong, Mr. Fennell said. This has helped temper investors' reaction to January's weak economic data. “I think the 5% to 6% correction purged some of the froth,” Mr. Fennell said. International equity funds, meanwhile, saw inflows of $3.45 billion, despite the recent weakness in emerging markets. The main driver of this was the strength of Europe and Asia, said Todd Rosenbluth, director of ETF and mutual fund research at S&P Capital IQ. “Europe is finally emerging from its recession,” Mr. Rosenbluth said. “Investors are returning to the eurozone, where they were underexposed historically.” Fixed-income funds also saw heavy outflows, totaling $2.86 billion. This followed outflows of $948 million the prior week. “I'm surprised because I would think that the strong market for fixed income would cause outflows to slow, not increase,” Mr. Rosenbluth said. “This speaks to the degree of fear for where yields are going in the long run.”

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