U.S. fund investors slow bond binge, retreat from gold and stocks: ICI

September 21, 2016 12:40 PM EDT

A computer screen showing stock graphs is reflected on glasses in this illustration photo taken in Bordeaux, France, March 30, 2016. REUTERS/Regis Duvignau

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By Trevor Hunnicutt

NEW YORK (Reuters) - Investors retreated from U.S.-based funds as stocks and bonds slid, pulling the most cash in the latest week since the British vote to quit the European Union, Investment Company Institute data showed on Wednesday.

The mutual funds and exchange-traded funds shed $4.1 billion overall in the week through Sept. 14, the trade group said, as stocks and bonds alike stumbled and investors debated whether central banks would continue to support markets.

"Typically investors will shift focus from equity to fixed income funds or vice versa, but last week they retrenched," said Todd Rosenbluth, director of ETF and mutual-fund research at S&P Global Market Intelligence. "Meanwhile, commodities and muni funds, which were extremely popular in 2016, have lost luster even though they are relatively safe havens."

Commodity funds recorded $898 million in withdrawals, the most since December 2013. SPDR Gold Shares (GLD) drove most of those outflows, separate Thomson Reuters Lipper data showed, foreshadowing a potential U.S. interest rate hike this year.

Gold had been a popular bet as it has been on course for its first positive year since 2012. But the relative appeal of non-yielding metal often slips as yields on other assets, such as bonds, rise.

Over the last month, some U.S. Federal Reserve policymakers have pointed to the possibility of raising interest rates soon. The central bank will announce its latest policy decision at 2 p.m. EDT (1800 GMT).

Bond funds took in $1 billion as the strong appeal of taxable bonds and tax-free government bonds among retail investors continues, but at the slowest pace since the "Brexit" vote. The funds had gathered $6.8 billion the week before, according to the ICI data.

Municipal bond fund inflows slowed to $800 million, the lowest since December, after performance slumped over the past month. Muni bond funds have not posted a week of withdrawals since last September, ICI data shows, but BlackRock Inc said Monday it was lowering its short-term view of the sector "due to richer valuations and higher Treasury yields."

Domestic stock funds posted $3.4 billion in outflows. The funds have been unpopular, especially among mutual fund investors, for the better part of the year.

But international stock funds managed to reel in $651 million after three straight weeks of outflows, ICI said.

(Reporting by Trevor Hunnicutt; Editing by Alan Crosby)

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