U.S. stock funds attract cash for first time in six weeks: Lipper

[December 28, 2018]  By Trevor Hunnicutt

NEW YORK (Reuters) - U.S. fund investors eased into wild stock markets during the latest week, adding $5.2 billion, according to Lipper data on Thursday that reflected the first net positive flows for funds since December's selloff began.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 27, 2018. REUTERS/Eduardo Munoz

Stock exchange-traded funds (ETFs) based in the United States attracted $5.4 billion during the week ended Dec. 26, while their mutual funds counterparts recorded a $173 million withdrawal, the least pulled from those funds since June.

Markets took a turn for the worse in December. While ETFs, used heavily by institutional investors, have been stock buyers in December, mutual fund investors typically used by retail investors sucked out a record $86 billion.

This week marked the first net positive result for stock mutual funds and ETFs in the past six weeks, according to Lipper, a research service.

But there are still strong signals of risk aversion in stock sectors and debt markets.

Technology sector funds, a leader during this bull market run but the victim of a steep selloff in recent weeks, recorded withdrawals of $2.2 billion, the most since early 2015, Lipper data showed. The S&P 500 Information Technology sector is down 18 percent over the past three months, including reinvested dividends.

Financial sector funds are seen hurting in a declining economy or one in which short-term rates heavily influenced by the Federal Reserve rise too high. Over the most recent week, investors pulled $1.7 billion, bringing withdrawals for the quarter to $8.7 billion, the most on record.

A category tracked by Lipper that includes leveraged loans posted $3.5 billion in withdrawals, the most on record and nearly 4 percent of the assets in those funds. In recent weeks the category has been struck both by concerns about the high levels of debt taken on by U.S. corporations and the possibility that the Federal Reserve might slow its rate hikes and diminish the value of loans that pay more as rates rise. High-yield and corporate investment-grade bond funds also recorded multi-billion dollar withdrawals.

The end-of-year activity within funds has been elevated as investors rotate out of mutual funds in an effort to limit their taxes or reposition for the new year. The data can also be distorted by capital gains distributions.

The market volatility is making cash king for now. Treasury funds attracted $4.2 billion during the week, the most since February 2015, and money-market funds gathered $33 billion.

(Reporting by Trevor ; Editing by Dan Grebler)

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