U.S. fund investors withdraw most cash in three years: ICI

By Trevor Hunnicutt

NEW YORK (Reuters) – U.S. fund investors stripped the most cash from U.S.-based mutual funds in more than three years in the latest week, Investment Company Institute (ICI) data showed on Wednesday, as concern mounted about interest rates and economic growth.

More than $17 billion poured out of stock funds during the week ended Dec. 12, the most since June, while a six-week high of $12 billion fled bond funds, as mutual fund withdrawals overwhelmed ongoing demand for exchange-traded funds (ETFs).

The withdrawals appeared to show a wild year of up-and-down trading testing the patience of investors now facing a rare occurrence – losses across both stock and bond funds.

The Federal Reserve on Wednesday raised its target interest rate for a ninth time in about three years.

But the U.S. central bank’s efforts to restore normal policy a decade after it responded to financial crisis by pushing rates near zero has irked markets. Stocks slid, with the down 1.5 percent for the day and 2.9 percent for the year, including dividends.

In addition to the rate hikes, investors have been worried about excessive corporate borrowing, rising short-term bond yields, U.S.-China trade tensions and slowing growth in corporate profits.

Individual investors are the most pessimistic about stock performance they have been in more than five years, with 49 percent expecting the market to fall in the next six months, according to a widely followed survey by the American Association of Individual Investors.

Yet the withdrawals represent a fraction of a percent of overall mutual fund assets, said Sean Collins, ICI’s chief economist, in a statement. He said mutual fund investors are responding “moderately” to market activity, and “for the most part are maintaining their investment plans and asset allocations.”

The figures show $34.8 billion in withdrawals overall for the week, reflecting net activity in mutual funds and ETFs but not money-market funds where investors park cash.

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