US-based fund investors underscored their preference for foreign stocks, reversing the prior week's inflows for domestic equity funds and moving money to Europe and emerging markets, Lipper data showed on Thursday. Investors pulled $6.6 billion from US-based stock funds that invest at home during the week ended May 3, marking their fourth week of outflows in the last five, the research service said.
"Domestic equity is still slumping," said Pat Keon, senior research analyst for Thomson Reuters Lipper, noting that US stocks seem over-bought. "The fund community seems to be going outside the US to look for growth." By contrast, US-based stock funds primarily invested abroad attracted $3 billion in their seventh straight week drawing in new money, Lipper said. Voters head to the polls on Sunday in the French presidential election runoff, but the chances for a euroskeptic winner seemed to ebb when centrist candidate Emmanuel Macron led in the first round on April 23.
European stock funds continued on their hot streak, reeling in $833 million in their biggest haul since March. Emerging market stocks pulled in $647 million in their 18th straight week of inflows, while Japanese stock funds attracted $210 million, their first inflows in four weeks, the data showed. US-based taxable bond funds pulled in $1.6 billion, marking their seventh straight week of inflows, the data showed. Loan-participation funds that invest in bonds that hike payouts as rates rise attracted $190 million and continued an unbroken streak of inflows this year.
Yet high-yield junk funds showed continued softness, posting $386 million in withdrawals during the latest week. Junk bond funds have recorded outflows in three of the last four weeks. "The yield on high yield is just not high enough," said Keon, "and the reward isn't enough for the risk." Within sectors, investors favored energy and real estate, while healthcare and utilities posted outflows. The $223 million taken in by energy sector funds during the week amounted to the best result since February and came before crude oil prices plunged to five-month lows on Thursday.