U.S.-based gold, stock funds suffer withdrawal in latest week: Lipper

October 27, 2016 5:15 PM EDT

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By Trevor Hunnicutt

NEW YORK (Reuters) - Investors pulled $902 million from U.S.-based funds invested in gold and other precious metals, Lipper data for the latest week showed on Thursday, as a stronger dollar and interest-rate hike fears weighed on the safe-haven asset.

The outflows pushed the funds to their highest level of withdrawals since December 2013.

Bets that the U.S. Federal Reserve will hike rates in December have pushed the dollar to nine-month highs against a basket of currencies this week.

"If we have continued strength in the dollar, that plays on commodities that are priced in the dollar," such as gold, said Tom Roseen, head of research services for Thomson Reuters Lipper.

Gold is prized in times of political uncertainty, such as the U.S. presidential election on Nov. 8, while higher interest rates lift the opportunity cost of holding non-yielding assets and boost the dollar.

Inflation-protected bond funds in the United States took in $385 million in their largest week of inflows since April, Lipper said. The bonds defend against rampant inflation, which also could trigger Fed rate hikes.

STOCK FUND LIQUIDATIONS

Mutual fund liquidations pushed cash withdrawals in U.S.-based stock funds to their highest point since August 2015, with $16.6 billion in outflows, according to Lipper.

The outflows were exacerbated by the Vantagepoint mutual funds liquidating. They are being converted to collective investment trusts (CITs) in an effort to cut fees.

CITs, which are not regulated by the U.S. Securities and Exchange Commission, can only be offered to qualified retirement plans, such as 401(k)s, and their less-stringent reporting requirements translate into lower operating expenses.

The week's numbers also reflect the closure of the 47-year-old Putnam Voyager Fund, which is being merged into the Putnam Growth Opportunities Fund.

Stock mutual fund flows have been under pressure this year, facing competition from lower-cost investments, including the collective trusts and exchange-traded funds.

Money-market funds absorbed $19.8 billion in the seven days through Oct. 26, the most money since August, the research service's data showed.

The funds are showing signs of stabilizing after reforms took effect on Oct. 14 requiring that some funds let their share prices float with the market and possibly impose redemption fees in times of market stress.

"My expectation is you see the market start to grow very significantly as we move through the end of this year," said Tom Callahan, head of the global cash management business at BlackRock Inc.

The following is a broad breakdown of the flows for the week, including ETFs:

Sector Flow Chg Pct of Assets ($ Count

($ blns) Assets blns)

All Equity Funds -16.604 -0.31 5,254.517 12,051

Domestic Equities -13.958 -0.37 3,700.815 8,611

Non-Domestic Equities -2.646 -0.17 1,553.702 3,440

All Taxable Bond Funds 0.776 0.03 2,347.980 6,047

All Money Market Funds 19.840 0.85 2,345.582 1,031

All Municipal Bond Funds 0.335 0.09 393.547 1,413

(Reporting by Trevor Hunnicutt; Editing by Jonathan Oatis)



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