In spite of the Cypriot crisis, investors remain willing to invest in risk assets, as continued inflows into stock and taxable fixed income funds demonstrated, according to Lipper data.
Investors spent much of the week ended March 27 trying to calculate the possible impact of a Cypriot exit from the eurozone and as well as to gauge the knock-on consequences of various bailout proposals. That didn’t stop U.S. stock market indices from trending higher during much of the week, as investors focused instead on strong home prices and manufacturing numbers, generating momentum that drove both the Dow Jones Industrial Average and the S&P 500 to wrap up the month at record highs.
Nor did fund investors seem daunted by any new eurozone risks. According to data released late last week by Lipper, mutual funds and exchange-traded funds (ETFs), excluding money market funds, recorded net inflows of $4.5 billion. Equity funds alone accounted for some $740 million in of those net sales. Mutual funds continued to dominate inflows for the 12th week in a row, with $640 million flowing into domestic products and $1.6 billion into overseas mutual funds, for total inflows of $2.3 billion for the week. That brings total mutual inflows to $75.2 billion for 2013 so far.
On the other side, equity ETF investors pulled a net $1.5 billion from their accounts; the SPDR S&P 500 ETF (SPY), with net outflows of $3 billion, dragged the broader group into the red. It was the second consecutive week of net outflows for ETFs, as investors also showed caution about emerging-market equity products, which reported net sales of about $1.5 billion.
Investors continue to allocate fresh capital to taxable bond funds as well as to stocks. As a category, taxable bond funds reported inflows of $3.8 billion, their twelfth straight week of net sales. Within that group, investors continued to show preference for bank loan products, investing another $1.3 billion and bringing the year-to-date total for the floating-rate bond group to $15.2 billion, already surpassing the 2012 total inflows of $12.2 billion.
Some investors still continue to opt for safety, however: ETFs tied to the performance of Treasury securities attracted $810 in inflows in the just-ended week, their strongest week since early November 2012. Municipal bond funds continued to report net outflows, totaling $43 million in the last week, the fourth consecutive week of outflows, as investors become more concerned about the impact of government budget cuts and municipal pension obligations on municipal finances.
In spite of the fact that retail investors sold $2.8 billion of money market funds, the group still ended the week with net inflows of $889 million.