U.S.-based TIPS funds attract 2nd biggest inflows on record: Lipper

November 10, 2016 5:47 PM EST

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By Sam Forgione

NEW YORK (Reuters) - Investors in U.S.-based funds poured $1 billion into inflation-protected bond funds in the week ended Nov. 9, marking the funds' second-biggest inflows since records began in October 2002, data from Thomson Reuters' Lipper service showed on Thursday.

Stock funds attracted $265 million in new cash overall, marking their first inflows in six weeks. U.S.-focused stock funds attracted $2.4 billion in inflows, while funds that hold non-U.S. stocks posted $2.2 billion in outflows.

The figures represent inflows and outflows during the week ended Wednesday, which captures movements following Donald Trump's U.S. presidential victory. Shares rallied strongly on Wednesday and Thursday with the long end of the Treasury yield curve selling off, suggesting investors expect Trump's policies will boost economic growth and inflationary pressures.

"Flows into inflation-protected securities funds was the second largest on record and much of that came from authorized participants (ETF investors), the largest occurring in April 2015," when investors were then bracing for rate hikes, said Tom Roseen, head of research services at Thomson Reuters Lipper. "If Trump truly plans on injecting money into infrastructure development and growing the economy, that could be inflationary," he said.

Roseen pointed out however that loan participation funds had their first week of outflows in 15. "So some investors are backing off their bet, slightly, that the Fed will raise rates in December," he said.

Some pundits think the Fed may need to evaluate what a Trump presidency will do to the economy before pulling the trigger, he said. "I think the economy will be doing just fine and they’ll still hike rates in December," Roseen said.

That thought played hand-in-hand with the rise in equities.

Investors poured $9.4 billion into stock ETFs, the biggest inflows since July, with the SPDR S&P 500 taking in over $6.5 billion and the iShares Russell 2000 ETF adding more than $1.3 billion. Equity ETF returns jumped 2.12 percent for the week.

In contrast, equity mutual funds witnessed $9.1 billion in net redemptions, their 35th consecutive week of net outflows, according to Lipper.

"So, mom and pop are still very concerned with the uncertainties facing them," Roseen said.

U.S.-based high-yield bond funds also saw cash withdrawals. The group posted $669 million of outflows over the weekly period, the fifth straight week of outflows, according to Lipper. At the opposite end of the credit spectrum, U.S.-based government-Treasury funds attracted $1.6 billion, the biggest inflows since late January.

(Reporting by Sam Forgione; Editing by Jennifer Ablan and Meredith Mazzilli)

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