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US Stock Funds Get Most Deposits Since at Least 2007

Friday, 25 Jan 2013 12:44 AM

 

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Stock mutual funds in the U.S. attracted $14.8 billion in net new money last week, the most since at least 2007, as investors returned to domestic equities.

Funds that invest in U.S. companies took in $8 billion and international stock funds drew $6.8 billion in the week ended Jan. 9, the Investment Company Institute in Washington said Wednesday in an e-mailed statement. Deposits for all long-term mutual funds, $27.5 billion, were the highest in weekly records going back to the start of 2007.

“Last week’s equity flows were extraordinary for the industry,” Robert Reynolds, chief executive officer of Boston-based Putnam Investments LLC, said Wednesday in an interview. “You are starting to see people come back.”

Investors have been avoiding domestic stock funds since the 2008 financial crisis, even as the Standard & Poor’s 500 Index has more than doubled since reaching a 12-year low in March 2009. Money instead flowed to bond funds, which were perceived as safer.

The flood of money into mutual funds followed a last-minute deal by U.S. lawmakers that avoided scheduled tax increases and spending cuts that could have slowed the economy.

Domestic stock funds saw redemptions of $99.6 billion in the first 11 months of 2012, according to data from Chicago- based research firm Morningstar Inc. Taxable bond funds attracted $242 billion and municipal bond funds won $53.1 billion in deposits.

In the most recent week, taxable bond funds received $7.31 billion in new money and municipal bond funds saw $2.46 billion in deposits, the ICI said.

Reynolds said many individual investors don’t understand how much they could lose in bond funds if interest rates climb significantly.

“There is tremendous downside risk with very little upside,” he said.

© Copyright 2013 Bloomberg News. All rights reserved.

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