US mutual-fund investors bought international stocks and riskier bonds during the latest week, reversing course after pulling the most cash this year from funds following the Brexit vote, Investment Company Institute data showed on Wednesday.
ICI said investors added $2 billion to US-based funds invested in developed-market stocks outside the country during the week ended July 6, after pulling $2.7 billion from the funds the week before in the funds' worst rout since 2011. The funds, invested in the United Kingdom, Germany and other advanced economies, have not pulled in that much money since the week that ended February 24.
US-based junk-bond funds stanched withdrawals, taking in $82 million one week after investors wiped $3.4 billion from the funds' ledgers in their biggest weekly outflows this year, according to ICI.
The week before, investors took the most money overall out of US-based stock and bond mutual funds this year following the British vote to leave the European Union, launching a process called "Brexit."
"Equity investors are facing tough trade-offs and decided to buy where there were temporary discounts caused by Brexit," said Matt Cody, co-chair of the investment committee at Wetherby Asset Management in New York.
He said investors have the choice of investing in stocks after the S&P 500 hit a record high for the third consecutive day on Wednesday or buying bonds when the 10-year Treasury's yield is near record lows.
Overall, US-based equity funds recorded withdrawals of $3.1 billion during the week, while bond funds attracted $1.3 billion, according to ICI, a fund trade group. Domestic stock funds more than doubled their outflows from the week prior, to $4.5 billion, adding to a brutal year for mutual-fund managers who specialize in picking US stocks.
Even as investors from BlackRock Inc to DoubleLine Capital's Jeffrey Gundlach said they favoured some buying in emerging markets, funds specialising in those stocks posted $610 million in outflows during the week.
Global-bond funds posted $142 million in outflows, ICI data showed.
"We are completely out of global debt; we don't believe paying governments to lend them money is a good investment plan for our clients," said Cody. "You can still get positive yield in emerging debt, but energy-price weakness and increasing sovereign-debt loads lead to risks outweighing the benefits."
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