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January 7, 2013

Lipper US Fund Flows: 2012 Flows End With a Whimper

by Lipper Alpha Insight.

In the final trading days of 2012, investors favored equity ETFs over mutual funds, while bond fund flows were largely flat.

With the most recent five-day trading period covered by the data released late yesterday by Lipper, including only one day of the new year, it may tell us more about how investors wrapped up 2012 than their views of what risks and opportunities will dominate in 2013.

Whether because of the debate over the so-called fiscal cliff or some last-minute tax selling, equity fund investors dumped $3.5 billion in assets in the week ended January 2, 2013, the data reveals. Domestic equity funds bore the brunt of that selling, reporting a total of more than $3.6 billion in net outflows as investors sought out better opportunities in Latin American funds (which attracted $115 million of inflows) and emerging markets funds (which pulled in another $220 million). Investors once again took a radically different view of exchange-traded funds (ETFs) than they did of mutual funds, injecting $7.1 billion into a group of broad market ETFs. One of the biggest beneficiaries once again was the SPDR S&P 500 ETF, which pulled in $3.8 billion, while the iShares MSCI Emerging Markets ETF reported more than $944 million in net inflows.

Taxable bond mutual funds had very modest inflows that totaled only $83 million — a figure that analysts could reasonably call ‘flat’ in relative terms. High yield funds were hit by net redemptions of $282 million – not unsurprising, given that in the eyes of many investors they have a similar risk profile to equity funds. Somehow, however, loan participation funds retained their appeal to investors, attracting net inflows of $241 million and becoming the leader in pulling in new capital within the taxable fixed income universe. Municipal debt funds witnessed relatively little activity – outflows totaled a mere $6 million, according to estimates – as pressure on investors to do something ahead of the potential for big tax law changes seemed to abate over the course of the last three weeks.

Money market funds witnessed the biggest flows of any category during the week ended January 2, reporting net inflows of $37.8 billion. Institutional investors accounted for the lion’s share of that movement, allocating $21.6 billion to the sector, while retail investors directed another $16.2 billion into these vehicles.

For more information on this week’s fund flows data, please refer to Lipper’s database or watch this video.

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