Investors in U.S.-based funds pumped the most money into stock exchange-traded funds since mid-September while also putting money into higher-quality corporate bonds in one of the last reporting weeks of the year, data from Thomson Reuters' Lipper service showed on Thursday.
Stock ETFs pulled in $8.68 billion in investor cash in the week ended December 12, the most since mid-September. The inflows offset outflows of $3.71 billion from stock mutual funds, leading to net inflows of $4.97 billion into stock funds.
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Investors were less drawn to bond funds overall than they were to stocks, and committed a net $1.24 billion into the funds. Bond mutual funds attracted $674.6 million, while bond ETFs attracted $570.34 million, which was the most cash committed to the passive funds in five weeks.
ETFs are generally believed to represent the investment behavior of institutional investors, while mutual funds are thought to represent the retail investor.
Institutional investors such as asset management firms tend to invest in ETFs toward the end of the year rather than in active funds, said Lipper analyst Matthew Lemieux.
Uncertainty over whether U.S. President Barack Obama and Congress will resolve the "fiscal cliff" of $600 billion in tax increases and spending cuts could also be motivating the less active investments, Lemieux added.
Despite gridlock over the budget deal, the benchmark S&P 500 stock index rose 1.36 percent over the reporting period. Data showing that U.S. non-farm payrolls added 146,000 jobs in November temporarily boosted confidence, although concerns over the "fiscal cliff" and data showing a plunge in consumer sentiment tempered optimism.
On Wednesday, the last day of Lipper's reporting period, the Federal Reserve fulfilled expectations by ramping up its monetary stimulus and committing to monthly purchases of $85 billion in Treasuries and mortgage-backed bonds in an effort to improve U.S. economic growth.
Among stock funds, investors put $3.87 billion into the SPDR S&P 500 ETF fund, and $1.57 billion into the iShares: MSCI Emerging Markets Fund, another ETF.
Among bond funds, investors poured $1.29 billion into funds that hold investment-grade corporate bonds, the most in five weeks.
Investors may consider riskier high-yield corporate bonds - whose funds attracted just $258.9 million over the period - as overpriced, while higher-quality investment-grade bonds also have the advantage of being less risky, said Lemieux.
The weekly Lipper fund flow data is compiled from reports issued by U.S.-domiciled mutual funds and exchange-traded funds.
The following is a broad breakdown of the flows for the week, including exchange-traded funds (in $ billions):
(Reporting by Sam Forgione; Editing by Mohammad Zargham)