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Lipper: Investors Pull Record $53 Billion From Taxable Bond Funds

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Friday, 16 November 2018 01:44 PM

U.S. fund investors are maintaining a wary position when it comes to bonds, pulling more cash after record withdrawals in October, Lipper data showed.

Taxable bond mutual funds and exchange-traded funds (ETFs) based in the United States posted $1.2 billion in withdrawals during the week ended Nov. 14, Lipper said.

Investors pulled $131 million from municipal bond funds in the eighth straight week of withdrawals for those products.

In October, more than $53 billion tumbled out of U.S.-based taxable bond funds, the largest withdrawals on records dating to 1992, according to Lipper. October marked only the 12th time since the March 2009 dawn of the U.S. bull market that stocks and bonds fell in tandem.

DoubleLine Capital LP portfolio manager Monica Erickson on Thursday told the Reuters Global Investment 2019 Outlook Summit that the withdrawals could continue as investors respond poorly to poor returns, particularly in investment-grade bonds widely held by retail investors as a source of stability.

"Investors open their statements and they look at their statements and they see that it's negative," said Erickson. On other the end of the credit spectrum, low-risk money market funds, where investors park cash, took in $12.4 billion, marking a fourth straight week netting new money.

Debt-buying fund managers have struggled to keep investors happy as losses start to pile up from rising rates that erode bond prices. The Federal Reserve has raised interest rates three times this year, to a range of 2 percent and 2.25 percent, and the central bank is expected to raise rates another quarter percentage point in December.

Erickson said the Fed risks tightening monetary policy too much. Also hurting demand for bonds during the week was a rebound in interest in risk-taking in the stock market. Relatively low-risk Treasury funds posted $1.1 billion in withdrawals, while stock funds took in $2.7 billion.

Rate-sensitive utilities sector funds pulled in $775 million, the most since December 2014.

And healthcare funds pulled in $1.7 billion, the most since the aftermath of the November 2016 U.S. presidential election. Some investors see gridlock after congressional elections this month that left the two houses of U.S. Congress split between Democrats and Republicans as helping to tamp down potential action to lower drug prices. 

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U.S. fund investors are maintaining a wary position when it comes to bonds, pulling more cash after record withdrawals in October, Lipper data showed.
investors, taxable, funds, billion, bond
Friday, 16 November 2018 01:44 PM
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