Equity funds see biggest outflows since 2015 market rout: BAML

[May 06, 2016]  By Karin Strohecker

LONDON (Reuters) - Investors pulled out of equities at the fastest rate since last summer's market rout and cut cash exposure, opting instead for less risky fixed income and precious metals assets ahead of U.S. jobs data, Bank of America Merrill Lynch (BAML) said on Friday.

Net outflows from equity funds almost tripled from the week before, soaring to $16.9 billion - the largest exodus since September, when investors fled stock markets after China's surprise devaluation sent global markets into a tail spin.

Money market funds bled $4.3 billion in the week to May 4, BAML said, bringing the total outflow in the past 10 weeks to $122 billion.

Meanwhile bond funds, having seen inflows in nine out of the past ten weeks, garnered $5.6 billion, while investments into precious metals rose more than five-fold to $1.7 billion.

U.S. employment likely rose again in April, data due on Friday is expected show, and a strong number would reinforce the view that the economy remains healthy, despite growth slowing sharply in the first quarter.

Across equity funds, U.S. stocks lost $13.7 billion, their largest outflow since September, while funds exposed to Europe saw $2.8 billion leave in their 13th straight week of losses - the longest losing streak since February 2008.

Japan funds had their eighth straight week of losses, seeing $800 million flee, while emerging market equities lost $500 million.

In fixed income, inflows to investment-grade bond vehicles picked up more steam, adding $5 billion, while high-yield ones suffered $2 billion of outflows.

"(The) massive preference for quality over junk in credit continues: largest investment-grade bond inflows in 13 months contrasts with largest high-yield bond outflows in three months," BAML's Chief Investment Strategist Michael Hartnett wrote in the note.

He added that the recent rally in oil prices also stoked rotation into emerging bond funds, with inflows rising to $1.2 billion in their eleventh week of gains, while U.S. government inflation linked bonds garnered $600 million in their twelfth straight week of gains.

U.S. municipal bond funds extended their winning streak to 33 weeks, adding $1 billion. But investors still reeling from the recent bond market sell-off, trimmed exposure to government and Treasury funds for the eleventh straight week, with net outflows slowing to $900 million.

(Reporting by Karin Strohecker)

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