U.S.-based taxable bond funds attract record $12.7 billion inflows: Lipper

[October 10, 2014]  By Sam Forgione

NEW YORK (Reuters) - Investors in U.S.-based funds poured a record $12.7 billion into taxable bond funds in the week ended Oct. 8 while committing $9.5 billion to money market funds in the wake of Bill Gross's departure from asset manager Pimco, data from Thomson Reuters' Lipper service showed on Thursday.

Of the net inflows into taxable bond funds, $7.9 billion went into taxable bond mutual funds, while $4.8 billion went into taxable bond exchange-traded funds, the data showed. The net inflows into low-risk money market funds marked a third straight week of new demand.

Stock funds posted $6.7 billion in net outflows, marking a second straight week of withdrawals. Stock mutual funds attracted a meager $330 million in new cash, while stock ETFs posted $7 billion in outflows.

The inflows into taxable bond funds showed investors redirecting some cash away from Pimco, the firm that Gross left on Sept. 26 after co-founding it more than 40 years ago, to rival funds, said Tom Roseen, head of research services at Lipper. Some of the inflows into money market funds likely came from investors who had pulled cash out of Pimco and were waiting to reallocate it, he said.
 

The institutional share class of the Metropolitan West Total Return Bond Fund was the biggest benefactor among taxable bond mutual funds with inflows of $1.6 billion over the week, while the institutional share class of the DoubleLine Total Return Bond Fund attracted the second-biggest inflows at $602 million.

"Investors' choice was not to go back to Pimco," Roseen said. "People are using money market funds to sit on the sidelines, whether it be because of volatility or to determine where they’re going to go after the Gross era has ended."

The Pimco Total Return Fund, which Gross ran and which ranks as the world's largest bond fund, posted $23.5 billion in outflows in September, with the largest daily outflow occurring on the day of Gross's departure for Janus Capital Group.

Riskier high-yield bond funds attracted $1.3 billion in new cash, marking their biggest inflows in seven weeks after hefty outflows of $2.3 billion the prior week. Funds that mainly hold safe-haven Treasuries attracted $2.4 billion, marking their biggest inflows since early February.

Investors took profits from stock funds on hesitation ahead of corporate earnings announcements and after market volatility over the period, Lipper's Roseen said.

The benchmark S&P 500, which gained 1.2 percent over the weekly period on strong U.S. jobs growth in September and the view that the Federal Reserve would keep rates lower for longer, plunged 1.5 percent on Oct. 7 on concerns over global growth.

The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Leslie Adler)

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